Goldman Sachs 2012 Annual Report Download - page 154

Notes to Consolidated Financial Statements
Note 9.
Collateralized Agreements and Financings
Collateralized agreements are securities purchased under
agreements to resell (resale agreements or reverse
repurchase agreements) and securities borrowed.
Collateralized financings are securities sold under
agreements to repurchase (repurchase agreements),
securities loaned and other secured financings. The firm
enters into these transactions in order to, among other
things, facilitate client activities, invest excess cash, acquire
securities to cover short positions and finance certain
firm activities.
Collateralized agreements and financings are presented on a
net-by-counterparty basis when a legal right of setoff exists.
Interest on collateralized agreements and collateralized
financings is recognized over the life of the transaction and
included in “Interest income” and “Interest expense,”
respectively. See Note 23 for further information about
interest income and interest expense.
The table below presents the carrying value of resale and
repurchase agreements and securities borrowed and
loaned transactions.
As of December
in millions 2012 2011
Securities purchased under agreements
to resell 1$141,334 $187,789
Securities borrowed 2136,893 153,341
Securities sold under agreements
to repurchase 1171,807 164,502
Securities loaned 213,765 7,182
1. Substantially all resale and repurchase agreements are carried at fair value
under the fair value option. See Note 8 for further information about the
valuation techniques and significant inputs used to determine fair value.
2. As of December 2012 and December 2011, $38.40 billion and $47.62 billion
of securities borrowed, and $1.56 billion and $107 million of securities loaned
were at fair value, respectively.
Resale and Repurchase Agreements
A resale agreement is a transaction in which the firm
purchases financial instruments from a seller, typically in
exchange for cash, and simultaneously enters into an
agreement to resell the same or substantially the same
financial instruments to the seller at a stated price plus
accrued interest at a future date.
A repurchase agreement is a transaction in which the firm
sells financial instruments to a buyer, typically in exchange
for cash, and simultaneously enters into an agreement to
repurchase the same or substantially the same financial
instruments from the buyer at a stated price plus accrued
interest at a future date.
The financial instruments purchased or sold in resale and
repurchase agreements typically include U.S. government
and federal agency, and investment-grade
sovereign obligations.
The firm receives financial instruments purchased under
resale agreements, makes delivery of financial instruments
sold under repurchase agreements, monitors the market
value of these financial instruments on a daily basis, and
delivers or obtains additional collateral due to changes in
the market value of the financial instruments, as
appropriate. For resale agreements, the firm typically
requires delivery of collateral with a fair value
approximately equal to the carrying value of the relevant
assets in the consolidated statements of financial condition.
Even though repurchase and resale agreements involve the
legal transfer of ownership of financial instruments, they
are accounted for as financing arrangements because they
require the financial instruments to be repurchased or
resold at the maturity of the agreement. However, “repos to
maturity” are accounted for as sales. A repo to maturity is a
transaction in which the firm transfers a security under an
agreement to repurchase the security where the maturity
date of the repurchase agreement matches the maturity date
of the underlying security. Therefore, the firm effectively no
longer has a repurchase obligation and has relinquished
control over the underlying security and, accordingly,
accounts for the transaction as a sale. The firm had no repos
to maturity outstanding as of December 2012 or
December 2011.
152 Goldman Sachs 2012 Annual Report