Goldman Sachs 2012 Annual Report Download - page 117

Notes to Consolidated Financial Statements
Transfers of Assets
Transfers of assets are accounted for as sales when the firm
has relinquished control over the assets transferred. For
transfers of assets accounted for as sales, any related gains
or losses are recognized in net revenues. Assets or liabilities
that arise from the firm’s continuing involvement with
transferred assets are measured at fair value. For transfers
of assets that are not accounted for as sales, the assets
remain in “Financial instruments owned, at fair value” and
the transfer is accounted for as a collateralized financing,
with the related interest expense recognized over the life of
the transaction. See Note 9 for further information about
transfers of assets accounted for as collateralized financings
and Note 10 for further information about transfers of
assets accounted for as sales.
Receivables from Customers and Counterparties
Receivables from customers and counterparties generally
relate to collateralized transactions. Such receivables are
primarily comprised of customer margin loans, certain
transfers of assets accounted for as secured loans rather
than purchases at fair value, collateral posted in connection
with certain derivative transactions, and loans held for
investment. Certain of the firm’s receivables from
customers and counterparties are accounted for at fair
value under the fair value option, with changes in fair value
generally included in “Market making” revenues.
Receivables from customers and counterparties not
accounted for at fair value are accounted for at amortized
cost net of estimated uncollectible amounts. Interest on
receivables from customers and counterparties is
recognized over the life of the transaction and included in
“Interest income.” See Note 8 for further information
about receivables from customers and counterparties.
Payables to Customers and Counterparties
Payables to customers and counterparties primarily consist
of customer credit balances related to the firm’s prime
brokerage activities. Payables to customers and
counterparties are accounted for at cost plus accrued
interest, which generally approximates fair value. While
these payables are carried at amounts that approximate fair
value, they are not accounted for at fair value under the fair
value option or at fair value in accordance with other U.S.
GAAP and therefore are not included in the firm’s fair value
hierarchy in Notes 6, 7 and 8. Had these payables been
included in the firm’s fair value hierarchy, substantially all
would have been classified in level 2 as of December 2012.
Receivables from and Payables to Brokers, Dealers
and Clearing Organizations
Receivables from and payables to brokers, dealers and
clearing organizations are accounted for at cost plus
accrued interest, which generally approximates fair value.
While these receivables and payables are carried at amounts
that approximate fair value, they are not accounted for at
fair value under the fair value option or at fair value in
accordance with other U.S. GAAP and therefore are not
included in the firm’s fair value hierarchy in Notes 6, 7 and
8. Had these receivables and payables been included in the
firm’s fair value hierarchy, substantially all would have
been classified in level 2 as of December 2012.
Insurance Activities
Certain of the firm’s insurance and reinsurance contracts
are accounted for at fair value under the fair value option,
with changes in fair value included in “Market making”
revenues. See Note 8 for further information about the fair
values of these insurance and reinsurance contracts. See
Note 12 for further information about the firm’s
reinsurance business classified as held for sale as of
December 2012.
Revenues from variable annuity and life insurance and
reinsurance contracts not accounted for at fair value
generally consist of fees assessed on contract holder account
balances for mortality charges, policy administration fees
and surrender charges. These revenues are recognized in
earnings over the period that services are provided and are
included in “Market making” revenues. Changes in
reserves, including interest credited to policyholder account
balances, are recognized in “Insurance reserves.”
Premiums earned for underwriting property catastrophe
reinsurance are recognized in earnings over the coverage
period, net of premiums ceded for the cost of reinsurance,
and are included in “Market making” revenues. Expenses
for liabilities related to property catastrophe reinsurance
claims, including estimates of losses that have been incurred
but not reported, are included in “Insurance reserves.”
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