Goldman Sachs 2000 Annual Report Download - page 70

68 Goldman Sachs Annual Report 2000
A reconciliation of the U.S. federal statutory income tax rate to the firm’s effective income tax rate is set forth below:
Year Ended November
2000 1999 (1)1998(1)
U.S. federal statutory income tax rate 35.0% 35.0% —%
Increase related to
State and local taxes, net of U.S. income tax effects 4.3 5.0 0.9
Foreign —— 15.5
Other (0.4) — 0.5
Rate before one-time events 38.9 40.0 16.9
Revaluation of deferred tax assets upon change in tax status —(41.4)(2) —
Rate benefit for partnership period —(37.7)(3) —
Other —3.2 —
Effective income tax rate 38.9% (35.9)% 16.9%
(1) The U.S. federal statutory income tax rate is not applicable to 1998 because the firm operated as a partnership and generally was not subject
to corporate federal income taxes. U.S. federal taxes paid by subsidiary corporations are included in “Other” for 1998.
(2) The deferred tax benefit recognized upon the firm’s change in tax status from partnership to corporate form primarily reflects the revaluation
of the deferred tax assets and liabilities at the firm’s corporate income tax rate.
(3) The rate benefit for the partnership period relates to the firm’s earnings prior to its conversion to corporate form, which generally were not
subject to corporate income taxes.
A tax benefit of approximately $116 million, related to the
delivery of restricted stock units and the exercise of
options, was included in “Additional paid-in capital” on the
consolidated statements of financial condition and changes
in shareholders’ equity and partners’ capital as of
November 2000.
Note 13/Regulated Subsidiaries
GS&Co. and Spear, Leeds & Kellogg, L.P. are registered U.S.
broker-dealers and futures commission merchants subject
to Rule 15c3-1 of the Securities and Exchange Commission
and Rule 1.17 of the Commodity Futures Trading Commission
which specify uniform minimum net capital requirements, as
defined, for their registrants. They have elected to compute
their net capital in accordance with the “Alternative Net
Capital Requirement” as permitted by Rule 15c3-1. As of
November 2000 and November 1999, GS&Co. had regula-
tory net capital, as defined, of $4.50 billion and $2.92
billion, respectively, which exceeded the amounts required
by $3.81 billion and $2.31 billion, respectively. As of
November 2000, Spear, Leeds & Kellogg, L.P. had regula-
tory net capital, as defined, of $837 million, which exceeded
the amounts required by $803 million.
GSI, a registered U.K. broker-dealer, is subject to the capi-
tal requirements of the Securities and Futures Authority
Limited, and GSJL, a Tokyo-based broker-dealer, is subject
to the capital requirements of the Financial Services
Agency. As of November 2000 and November 1999, GSI
and GSJL were in compliance with their local capital ade-
quacy requirements.
Certain other subsidiaries of the firm are also subject to
capital adequacy requirements promulgated by authorities
of the countries in which they operate. As of November
2000 and November 1999, these subsidiaries were in
compliance with their local capital adequacy requirements.
Note 14/Business Segments
In reporting to management, the firm’s operating results are
categorized into the following two principal segments:
Global Capital Markets, and Asset Management and
Securities Services.
Global Capital Markets
The Global Capital Markets segment includes services
related to the following:
Investment Banking. The firm provides a broad range of
investment banking services to a diverse group of corpora-
tions, financial institutions, governments and individuals.