Goldman Sachs 2013 Annual Report Download - page 145

Notes to Consolidated Financial Statements
Level 3 Rollforward
If a derivative was transferred to level 3 during a reporting
period, its entire gain or loss for the period is included in
level 3. Transfers between levels are reported at the
beginning of the reporting period in which they occur. In
the tables below, negative amounts for transfers into level 3
and positive amounts for transfers out of level 3 represent
net transfers of derivative liabilities.
Gains and losses on level 3 derivatives should be considered
in the context of the following:
‰A derivative with level 1 and/or level 2 inputs is classified
in level 3 in its entirety if it has at least one significant
level 3 input.
‰If there is one significant level 3 input, the entire gain or
loss from adjusting only observable inputs (i.e., level 1
and level 2 inputs) is classified as level 3.
‰Gains or losses that have been reported in level 3 resulting
from changes in level 1 or level 2 inputs are frequently
offset by gains or losses attributable to level 1 or level 2
derivatives and/or level 1, level 2 and level 3 cash
instruments. As a result, gains/(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
derivatives categorized as level 3 as of the end of the year.
Level 3 Derivative Assets and Liabilities at Fair Value for the Year Ended December 2013
in millions
Asset/
(liability)
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
Asset/
(liability)
balance,
end of
year
Interest rates — net $ (355) $ (78) $ 168 $ 1 $ (8) $ 196 $ (9) $ (1) $ (86)
Credit — net 6,228 (1) (977) 201 (315) (1,508) 695 (147) 4,176
Currencies — net 35 (93) (419) 22 (6) 169 139 (47) (200)
Commodities — net (304) (6) 58 21 (48) 281 50 8 60
Equities — net (1,248) (67) (202) 77 (472) 1,020 (15) (52) (959)
Total derivatives — net $ 4,356 $(245) 1$(1,372) 1$322 $(849) $ 158 $860 $(239) $2,991
1. The aggregate amounts include losses of approximately $1.29 billion and $324 million reported in “Market making” and “Other principal transactions,” respectively.
The net unrealized loss on level 3 derivatives of
$1.37 billion for 2013 principally resulted from changes in
level 2 inputs and was primarily attributable to losses on
certain credit derivatives, principally due to the impact of
tighter credit spreads, and losses on certain currency
derivatives, primarily due to changes in foreign
exchange rates.
Transfers into level 3 derivatives during 2013 primarily
reflected transfers of credit derivative assets from level 2,
principally due to reduced transparency of upfront credit
points and correlation inputs used to value
these derivatives.
Transfers out of level 3 derivatives during 2013 primarily
reflected transfers of certain credit derivatives to level 2,
principally due to unobservable credit spread and
correlation inputs no longer being significant to the
valuation of these derivatives and unobservable inputs not
being significant to the net risk of certain portfolios.
Goldman Sachs 2013 Annual Report 143