Goldman Sachs 2013 Annual Report Download - page 133

Notes to Consolidated Financial Statements
Level 3 Rollforward
If a cash instrument asset or liability was transferred to
level 3 during a reporting period, its entire gain or loss for
the period is included in level 3.
Level 3 cash instruments are frequently economically
hedged with level 1 and level 2 cash instruments and/or
level 1, level 2 or level 3 derivatives. Accordingly, gains or
losses that are reported in level 3 can be partially offset by
gains or losses attributable to level 1 or level 2 cash
instruments and/or level 1, level 2 or level 3 derivatives. As
a result, gains or losses included in the level 3 rollforward
below do not necessarily represent the overall impact on the
firm’s results of operations, liquidity or capital resources.
The tables below present changes in fair value for all cash
instrument assets and liabilities categorized as level 3 as of
the end of the year. Purchases in the tables below include
both originations and secondary market purchases.
Level 3 Cash Instrument Assets at Fair Value for the Year Ended December 2013
in millions
Balance,
beginning
of year
Net
realized
gains/
(losses)
Net unrealized
gains/(losses)
relating to
instruments
still held at
year-end Purchases Sales Settlements
Transfers
into
level 3
Transfers
out of
level 3
Balance,
end of
year
Non-U.S. government and
agency obligations $ 26 $ 7 $ 5 $ 12 $ (20) $ — $ 10 $ — $ 40
Mortgage and other asset-backed
loans and securities:
Loans and securities backed by
commercial real estate 3,389 206 224 733 (894) (1,055) 262 (173) 2,692
Loans and securities backed by
residential real estate 1,619 143 150 660 (467) (269) 209 (84) 1,961
Bank loans and bridge loans 11,235 529 444 3,725 (2,390) (4,778) 942 (383) 9,324
Corporate debt securities 2,821 407 398 1,140 (1,584) (576) 404 (137) 2,873
State and municipal obligations 619 6 (2) 134 (492) (2) 6 (12) 257
Other debt obligations 1,185 47 38 648 (445) (161) 14 (519) 807
Equities and convertible debentures 14,855 189 1,709 1,866 (862) (1,610) 882 (2,344) 14,685
Total $35,749 $1,534 1$2,966 1$8,918 $(7,154) $(8,451) $2,729 $(3,652) $32,639
Level 3 Cash Instrument Liabilities at Fair Value for the Year Ended December 2013
in millions
Balance,
beginning
of year
Net
realized
(gains)/
losses
Net unrealized
(gains)/losses
relating to
instruments
still held at
year-end Purchases Sales Settlements
Transfers
into
level 3
Transfers
out of
level 3
Balance,
end of
year
Total $ 642 $ (1) $ (64) $ (432) $ 269 $ 8 $ 35 $ (160) $ 297
1. The aggregate amounts include gains of approximately $1.09 billion, $2.69 billion and $723 million reported in “Market making,” “Other principal transactions” and
“Interest income,” respectively.
The net unrealized gain on level 3 cash instruments of
$3.03 billion (reflecting $2.97 billion on cash instrument
assets and $64 million on cash instrument liabilities) for
2013 primarily consisted of gains on private equity
investments, principally driven by strong corporate
performance, bank loans and bridge loans, primarily due to
tighter credit spreads and favorable company-specific
events, and corporate debt securities, primarily due to
tighter credit spreads.
Transfers into level 3 during 2013 primarily reflected
transfers of certain bank loans and bridge loans and private
equity investments from level 2, principally due to a lack of
market transactions in these instruments.
Transfers out of level 3 during 2013 primarily reflected
transfers of certain private equity investments to level 2,
principally due to increased transparency of market prices
as a result of market transactions in these instruments.
Goldman Sachs 2013 Annual Report 131