Goldman Sachs 2012 Annual Report Download - page 121

Notes to Consolidated Financial Statements
The fair values for substantially all of the firm’s financial
assets and financial liabilities are based on observable prices
and inputs and are classified in levels 1 and 2 of the fair
value hierarchy. Certain level 2 and level 3 financial assets
and financial liabilities may require appropriate valuation
adjustments that a market participant would require to
arrive at fair value for factors such as counterparty and the
firm’s credit quality, funding risk, transfer restrictions,
liquidity and bid/offer spreads. Valuation adjustments are
generally based on market evidence.
See Notes 6 and 7 for further information about fair value
measurements of cash instruments and derivatives,
respectively, included in “Financial instruments owned, at
fair value” and “Financial instruments sold, but not yet
purchased, at fair value,” and Note 8 for further
information about fair value measurements of other
financial assets and financial liabilities accounted for at fair
value under the fair value option.
Financial assets and financial liabilities accounted for at fair
value under the fair value option or in accordance with
other U.S. GAAP are summarized below.
As of December
$ in millions 2012 2011
Total level 1 financial assets $ 190,737 $ 136,780
Total level 2 financial assets 502,293 587,416
Total level 3 financial assets 47,095 47,937
Cash collateral and counterparty netting 1(101,612) (120,821)
Total financial assets at fair value $ 638,513 $ 651,312
Total assets $ 938,555 $ 923,225
Total level 3 financial assets as a percentage of Total assets 5.0% 5.2%
Total level 3 financial assets as a percentage of Total financial assets at fair value 7.4% 7.4%
Total level 1 financial liabilities $ 65,994 $ 75,557
Total level 2 financial liabilities 318,764 319,160
Total level 3 financial liabilities 25,679 25,498
Cash collateral and counterparty netting 1(32,760) (31,546)
Total financial liabilities at fair value $ 377,677 $ 388,669
Total level 3 financial liabilities as a percentage of Total financial liabilities at fair value 6.8% 6.6%
1. Represents the impact on derivatives of cash collateral netting, and counterparty netting across levels of the fair value hierarchy. Netting among positions classified
in the same level is included in that level.
Level 3 financial assets as of December 2012 decreased
compared with December 2011, primarily reflecting a
decrease in derivative assets, partially offset by an increase
in private equity investments. The decrease in derivative
assets primarily reflected a decline in credit derivative
assets, principally due to settlements, unrealized losses and
sales, partially offset by net transfers from level 2. Level 3
currency derivative assets also declined compared with
December 2011, principally due to unrealized losses and
net transfers to level 2. The increase in private equity
investments primarily reflected purchases and unrealized
gains, partially offset by settlements and net transfers to
level 2.
See Notes 6, 7 and 8 for further information about level 3
cash instruments, derivatives and other financial assets and
financial liabilities accounted for at fair value under the fair
value option, respectively, including information about
significant unrealized gains and losses, and transfers in and
out of level 3.
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