Goldman Sachs 2012 Annual Report Download - page 176

Notes to Consolidated Financial Statements
Note 18.
Commitments, Contingencies and Guarantees
Commitments
The table below presents the firm’s commitments.
Commitment Amount by Period
of Expiration as of December 2012
Total Commitments
as of December
in millions 2013
2014-
2015
2016-
2017
2018-
Thereafter 2012 2011
Commitments to extend credit 1
Commercial lending: 2
Investment-grade $ 7,765 $11,632 $33,620 $ 719 $ 53,736 $ 51,281
Non-investment-grade 2,114 4,462 9,833 4,693 21,102 14,217
Warehouse financing 556 228 — — 784 247
Total commitments to extend credit 10,435 16,322 43,453 5,412 75,622 65,745
Contingent and forward starting resale and securities borrowing
agreements 347,599 — — — 47,599 54,522
Forward starting repurchase and secured lending agreements 36,144 — — — 6,144 17,964
Letters of credit 4614 160 — 15 789 1,353
Investment commitments 1,378 2,174 258 3,529 7,339 9,118
Other 4,471 53 31 69 4,624 5,342
Total commitments $70,641 $18,709 $43,742 $9,025 $142,117 $154,044
1. Commitments to extend credit are presented net of amounts syndicated to third parties.
2. Includes commitments associated with the former William Street credit extension program.
3. These agreements generally settle within three business days.
4. Consists of commitments under letters of credit issued by various banks which the firm provides to counterparties in lieu of securities or cash to satisfy various
collateral and margin deposit requirements.
Commitments to Extend Credit
The firm’s commitments to extend credit are agreements to
lend with fixed termination dates and depend on the
satisfaction of all contractual conditions to borrowing. The
total commitment amount does not necessarily reflect
actual future cash flows because the firm may syndicate all
or substantial portions of these commitments and
commitments can expire unused or be reduced or cancelled
at the counterparty’s request.
The firm generally accounts for commitments to extend
credit at fair value. Losses, if any, are generally recorded,
net of any fees in “Other principal transactions.”
As of December 2012, approximately $16.09 billion of the
firm’s lending commitments were held for investment and
were accounted for on an accrual basis. As of
December 2012, the carrying value and the estimated fair
value of such lending commitments were liabilities of
$63 million and $523 million, respectively. As these lending
commitments are not accounted for at fair value under the
fair value option or at fair value in accordance with other
U.S. GAAP, their fair value is not included in the firm’s fair
value hierarchy in Notes 6, 7 and 8. Had these
commitments been included in the firm’s fair value
hierarchy, they would have primarily been classified in
level 3 as of December 2012.
Commercial Lending. The firm’s commercial lending
commitments are extended to investment-grade and non-
investment-grade corporate borrowers. Commitments to
investment-grade corporate borrowers are principally used
for operating liquidity and general corporate purposes. The
firm also extends lending commitments in connection with
contingent acquisition financing and other types of
corporate lending as well as commercial real estate
financing. Commitments that are extended for contingent
acquisition financing are often intended to be short-term in
nature, as borrowers often seek to replace them with other
funding sources.
174 Goldman Sachs 2012 Annual Report