Goldman Sachs 2012 Annual Report Download - page 128

Notes to Consolidated Financial Statements
Level 3 Cash Instrument Assets at Fair Value for the Year Ended December 2011
in millions
Balance,
beginning
of year
Net realized
gains/
(losses)
Net unrealized
gains/(losses)
relating to
instruments
still held at
year-end Purchases 1Sales Settlements
Net
transfers
in and/or
(out) of
level 3
Balance,
end of
year
Non-U.S. government obligations $ — $ 25 $ (63) $ 27 $ (123) $ (8) $ 290 $ 148
Mortgage and other asset-backed loans
and securities:
Loans and securities backed by
commercial real estate 3,976 222 80 1,099 (1,124) (831) (76) 3,346
Loans and securities backed by
residential real estate 2,501 253 (81) 768 (702) (456) (574) 1,709
Bank loans and bridge loans 9,905 540 (216) 6,725 (2,329) (1,554) (1,786) 11,285
Corporate debt securities 2,737 391 (132) 1,319 (1,137) (697) (1) 2,480
State and municipal obligations 754 12 (1) 448 (591) (13) (10) 599
Other debt obligations 1,274 124 (17) 560 (388) (212) 110 1,451
Equities and convertible debentures 11,060 240 338 2,731 (1,196) (855) 1,349 13,667
Total $32,207 $1,807 2$ (92) 2$13,677 $(7,590) $(4,626) $ (698) $34,685
Level 3 Cash Instrument Liabilities at Fair Value for the Year Ended December 2011
in millions
Balance,
beginning
of year
Net realized
(gains)/
losses
Net unrealized
(gains)/losses
relating to
instruments
still held at
year-end Purchases 1Sales Settlements
Net
transfers
in and/or
(out) of
level 3
Balance,
end of
year
Total $ 446 $ (27) $ 218 $ (491) $ 475 $ 272 $ 12 $ 905
1. Includes both originations and secondary market purchases.
2. The aggregate amounts include approximately $(202) million, $623 million and $1.29 billion reported in “Market making,” “Other principal transactions” and
“Interest income,” respectively.
The net unrealized loss on level 3 cash instruments of
$310 million (reflecting losses of $92 million on cash
instrument assets and $218 million on cash instrument
liabilities) for the year ended December 2011 primarily
consisted of losses on bank loans and bridge loans and
corporate debt securities, primarily reflecting the impact of
unfavorable credit markets and losses on relationship
lending. These losses were partially offset by gains in
private equity investments, where prices were generally
corroborated through market transactions in similar
financial instruments during the year.
Significant transfers in or out of level 3 during the year
ended December 2011 included:
‰Bank loans and bridge loans: net transfer out of level 3 of
$1.79 billion, primarily due to transfers to level 2 of
certain loans due to improved transparency of market
prices as a result of market transactions in these or similar
loans, partially offset by transfers to level 3 of other loans
primarily due to reduced transparency of market prices as
a result of less market activity in these loans.
‰Equities and convertible debentures: net transfer into
level 3 of $1.35 billion, primarily due to transfers to
level 3 of certain private equity investments due to
reduced transparency of market prices as a result of less
market activity in these financial instruments, partially
offset by transfers to level 2 of other private equity
investments due to improved transparency of market
prices as a result of market transactions in these
financial instruments.
‰Loans and securities backed by residential real estate: net
transfer out of level 3 of $574 million, principally due to
transfers to level 2 of certain loans due to improved
transparency of market prices used to value these loans,
as well as unobservable inputs no longer being significant
to the valuation of these loans.
126 Goldman Sachs 2012 Annual Report