Goldman Sachs 2003 Annual Report Download - page 75

Download and view the complete annual report

Please find page 75 of the 2003 Goldman Sachs annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 116

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116

GOLDMAN SACHS 2003 ANNUAL REPORT 73
Notes to Consolidated Financial Statements
note 1
DESCRIPTION OF BUSINESS
The Goldman Sachs Group, Inc. (Group Inc.), a
Delaware corporation, together with its consolidated
subsidiaries (collectively, the firm), is a leading global
investment banking, securities and investment manage-
ment firm that provides a wide range of services world-
wide to a substantial and diversified client base that
includes corporations, financial institutions, governments
and high-net-worth individuals.
The firm’s activities are divided into three segments:
• investment banking – The firm provides a broad
range of investment banking services to a diverse
group of corporations, financial institutions, gov-
ernments and individuals.
• trading and principal investments – The firm
facilitates customer transactions with a diverse
group of corporations, financial institutions, gov-
ernments and individuals and takes proprietary
positions through market making in, and trading of,
fixed income and equity products, currencies, com-
modities and derivatives on such products. In addi-
tion, the firm engages in floor-based and electronic
market making as a specialist on U.S. equities and
options exchanges and clears customer transactions
on major stock, options and futures exchanges
worldwide. In connection with the firm’s merchant
banking and other investment activities, the firm
makes principal investments directly and through
funds that the firm raises and manages.
• asset management and securities services –
The firm offers a broad array of investment strat-
egies, advice and planning across all major asset
classes to a diverse client base of institutions and
individuals and provides prime brokerage, financing
services and securities lending services to mutual
funds, pension funds, hedge funds, foundations,
endowments and high-net-worth individuals.
The firm made certain changes to its segment reporting
structure in 2003. These changes included reclassifying
the following from Asset Management and Securities
Services to Trading and Principal Investments:
•equity commissions and clearing and execution fees;
•merchant banking overrides; and
•the matched book businesses.
These reclassifications did not affect the firm’s previously
reported consolidated results of operations, financial con-
dition or cash flows. See Note 15 for further information
regarding the firm’s segments.
note 2
SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
These consolidated financial statements include the
accounts of Group Inc. and all other entities in which the
firm has a controlling financial interest. All material inter-
company transactions and balances have been elimi-
nated. The firm determines whether it has a controlling
financial interest in an entity by first evaluating whether
the entity is a voting interest entity, a variable interest
entity (VIE), a special-purpose entity (SPE) or a qualify-
ing special-purpose entity (QSPE) under generally
accepted accounting principles.
Voting interest entities are entities in which the total
equity investment at risk is sufficient to enable each entity
to finance itself independently and provides the equity
holders with the obligation to absorb losses, the right to
receive residual returns and the right to make decisions
about the entity’s activities.
Voting interest entities are consolidated in accordance
with Accounting Research Bulletin (ARB) No. 51,
“Consolidated Financial Statements,” as amended. ARB
No. 51 states that the usual condition for a controlling
financial interest in an entity is ownership of a majority
voting interest. Accordingly, the firm consolidates voting
interest entities in which it has all, or a majority of, the