Goldman Sachs 2012 Annual Report Download - page 76

Management’s Discussion and Analysis
Off-Balance-Sheet Arrangements and
Contractual Obligations
Off-Balance-Sheet Arrangements
We have various types of off-balance-sheet arrangements
that we enter into in the ordinary course of business. Our
involvement in these arrangements can take many different
forms, including:
‰purchasing or retaining residual and other interests in
special purpose entities such as mortgage-backed and
other asset-backed securitization vehicles;
‰holding senior and subordinated debt, interests in limited
and general partnerships, and preferred and common
stock in other nonconsolidated vehicles;
‰entering into interest rate, foreign currency, equity,
commodity and credit derivatives, including total
return swaps;
‰entering into operating leases; and
‰providing guarantees, indemnifications, loan
commitments, letters of credit and representations
and warranties.
We enter into these arrangements for a variety of business
purposes, including securitizations. The securitization
vehicles that purchase mortgages, corporate bonds, and
other types of financial assets are critical to the functioning
of several significant investor markets, including the
mortgage-backed and other asset-backed securities
markets, since they offer investors access to specific cash
flows and risks created through the securitization process.
We also enter into these arrangements to underwrite client
securitization transactions; provide secondary market
liquidity; make investments in performing and
nonperforming debt, equity, real estate and other assets;
provide investors with credit-linked and asset-repackaged
notes; and receive or provide letters of credit to satisfy
margin requirements and to facilitate the clearance and
settlement process.
Our financial interests in, and derivative transactions with,
such nonconsolidated entities are generally accounted for at
fair value, in the same manner as our other financial
instruments, except in cases where we apply the equity
method of accounting.
The table below presents where a discussion of our various
off-balance-sheet arrangements may be found in this
Annual Report. In addition, see Note 3 to the consolidated
financial statements for a discussion of our
consolidation policies.
Type of Off-Balance-Sheet Arrangement Disclosure in Annual Report
Variable interests and other obligations, including
contingent obligations, arising from variable interests in
nonconsolidated VIEs
See Note 11 to the consolidated financial statements.
Leases, letters of credit, and lending and other commitments See “Contractual Obligations” below and Note 18 to the
consolidated financial statements.
Guarantees See “Contractual Obligations” below and Note 18 to the
consolidated financial statements.
Derivatives See Notes 4, 5, 7 and 18 to the consolidated financial
statements.
74 Goldman Sachs 2012 Annual Report