Goldman Sachs 2007 Annual Report Download - page 103

Notes to Consolidated Financial Statements
Liabilities at Fair Value as of November 2007
Netting and
(in millions)
Level 1 Level 2 Level 3 Collateral Total
U.S. government, federal agency and
sovereign obligations $ 57,714 $ 923 $ — $ — $ 58,637
Bank loans — 3,525 38 — 3,563
Corporate debt securities and
other debt obligations — 7,764 516 — 8,280
Equities and convertible debentures 44,076 1,054 — — 45,130
Physical commodities — 35 — — 35
Cash instruments 101,790 13,301 554 — 115,645
Derivative contracts 212 117,794 13,644 (32,272)
(6) 99,378
Financial instruments sold, but not yet
purchased, at fair value 102,002 131,095 14,198 (32,272) 215,023
Unsecured short-term borrowings
(1) — 44,060 4,271 — 48,331
Bank deposits
(2) — 463 — — 463
Securities loaned
(3)
— 5,449 — — 5,449
Financial instruments sold under agreements
to repurchase, at fair value — 159,178 — — 159,178
Other secured financings
(4)
— 33,581 — — 33,581
Unsecured long-term borrowings
(5) — 15,161 767 — 15,928
Total liabilities at fair value $102,002 $388,987 $19,236 $(32,272) $477,953
(1) Consists of promissory notes, commercial paper and hybrid financial instruments.
(2) Consists of certificates of deposit issued by GS Bank USA.
(3) Reflects securities loaned within Trading and Principal Investments. Excludes securities loaned within Securities Services, which are accounted for based on the amount
of cash collateral received plus accrued interest.
(4) Primarily includes transfers accounted for as financings rather than sales under SFAS No. 140 and debt raised through the firm’s William Street program.
(5) Primarily includes hybrid financial instruments and prepaid physical commodity transactions.
(6) Represents cash collateral and the impact of netting across the levels of the fair value hierarchy. Netting among positions classified within the same level is included in
that level.
Cash Instruments
The net unrealized loss on level 3 cash instruments was
$2.59 billion for the year ended November 2007 (which
included $2.29 billion of unrealized losses on assets and
$294 million of unrealized losses on liabilities), primarily
consisting of unrealized losses on subprime residential mortgage
loans and securities as well as non-investment-grade loan
commitments, partially offset by unrealized gains on principal
investments. Level 3 cash instruments are frequently hedged
with instruments classified in level 1 and level 2, and accordingly,
gains or losses that have been reported in level 3 are frequently
offset by gains or losses attributable to instruments classified
in level 1 or level 2 or by gains or losses on derivative contracts
classified in level 3 of the fair value hierarchy.
Level 3 Gains and Losses
The table below sets forth a summary of changes in the fair
value of the firm’s level 3 financial assets and liabilities for the
year ended November 2007. The table reflects gains and losses
for the full year for all financial assets and liabilities categorized
as level 3 as of November 2007. The table does not include
gains or losses that were reported in level 3 in prior periods
for financial assets and liabilities that were transferred out of
level 3 prior to November 2007. As reflected in the table below,
the net unrealized gain on level 3 financial assets and liabilities
was $1.31 billion for the year ended November 2007. This net
unrealized gain should be considered in the context of the
factors discussed below.
101Goldman Sachs 2007 Annual Report