Goldman Sachs 2000 Annual Report Download - page 47

the custody of securities and other instruments, and the
detection and prevention of employee errors or improper or
fraudulent activities. Its personnel work closely with
Information Technology in creating systems to enable
appropriate supervision and management of its policies.
The Global Operations Department is also responsible,
together with other areas of Goldman Sachs, including the
Legal and Compliance departments, for ensuring compli-
ance with applicable regulations with respect to the clear-
ance and settlement of transactions and the margining of
positions. The Network Management Department oversees
our relationships with our clearance and settlement agents,
regularly reviews agents’ performance and meets with
these agents to review operational issues. The Operational
Risk Department, created in fiscal year 2000, is responsible
for establishing, maintaining and approving our operational
risk management framework and policies for the overall
effective management of operational risk.
Accounting Developments
In September 2000, the Financial Accounting Standards
Board (FASB) issued Statement of Financial Accounting
Standards (SFAS) No. 140, “Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of
Liabilities—a replacement of FASB Statement No. 125,”
which revises the standards for accounting for securitiza-
tions and other transfers of financial assets and collateral. In
addition, specific implementation guidelines have been
established to further distinguish transfers of financial
assets that are sales from transfers that are secured bor-
rowings. SFAS No. 140 is effective for transfers occurring
after March 31, 2001 and for disclosures relating to securiti-
zation transactions and collateral for fiscal years ended after
December 15, 2000. We intend to adopt the provisions
of SFAS No. 140 in 2001 and are currently assessing
their effect.
In June 2000, the FASB issued SFAS No. 138, “Accounting
for Certain Derivative Instruments and Certain Hedging
Activities,” which is an amendment of SFAS No. 133,
“Accounting for Derivative Instruments and Hedging
Activities.” The Statement is effective concurrently with
SFAS No. 137, “Accounting for Derivative Instruments and
Hedging Activities—Deferral of the Effective Date of FASB
Statement No. 133—an amendment of FASB Statement No.
133,” which deferred to fiscal years beginning after June 15,
2000 the effective date of the accounting and reporting
requirements of SFAS No. 133. These statements establish
accounting and reporting standards for derivative instru-
ments, including certain derivative instruments embedded
in other contracts (collectively, referred to as “deriva-
tives”), and for hedging activities. These statements
require that an entity recognize all derivatives as either
assets or liabilities in the statement of financial condition
and measure those instruments at fair value. The account-
ing for changes in the fair value of a derivative instrument
depends on its intended use and the resulting designation.
We adopted the provisions of these statements on
November 25, 2000, the first day of our 2001 fiscal year.
The effect of this adoption was not material to our financial
condition or the results of our operations.
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