Goldman Sachs 2012 Annual Report Download - page 147

Notes to Consolidated Financial Statements
Receivables from Customers and Counterparties.
Receivables from customers and counterparties at fair
value, excluding insurance and reinsurance contracts, are
primarily comprised of transfers of assets accounted for as
secured loans rather than purchases. The significant inputs
to the valuation of such receivables are commodity prices,
interest rates, the amount and timing of expected future
cash flows and funding spreads. The range of significant
unobservable inputs used to value level 3 receivables from
customers and counterparties as of December 2012 is
as follows:
‰Funding spreads: 57 bps to 145 bps (weighted average:
105 bps)
Generally, an increase in funding spreads would result in a
lower fair value measurement.
Receivables from customers and counterparties not
accounted for at fair value are accounted for at amortized
cost net of estimated uncollectible amounts, which
generally approximates fair value. Such receivables are
primarily comprised of customer margin loans and
collateral posted in connection with certain derivative
transactions. While these items 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 items been included in the firm’s fair value
hierarchy, substantially all would have been classified in
level 2 as of December 2012. Receivables from customers
and counterparties not accounted for at fair value also
includes loans held for investment, which are primarily
comprised of collateralized loans to private wealth
management clients and corporate loans. As of
December 2012 and December 2011, the carrying value of
such loans was $6.50 billion and $3.76 billion, respectively,
which generally approximated fair value. As of
December 2012, had these loans been carried at fair value
and included in the fair value hierarchy, $2.41 billion and
$4.06 billion would have been classified in level 2 and
level 3, respectively.
Deposits. The significant inputs to the valuation of time
deposits are interest rates and the amount and timing of
future cash flows. The inputs used to value the embedded
derivative component of hybrid financial instruments are
consistent with the inputs used to value the firm’s other
derivative instruments. See Note 7 for further information
about derivatives. See Note 14 for further information
about deposits.
The firm’s deposits that are included in level 3 are hybrid
financial instruments. As the significant unobservable
inputs used to value hybrid financial instruments primarily
relate to the embedded derivative component of these
deposits, these inputs are incorporated in the firm’s
derivative disclosures related to unobservable inputs in
Note 7.
Goldman Sachs 2012 Annual Report 145