Goldman Sachs 2013 Annual Report Download - page 156

Notes to Consolidated Financial Statements
Receivables from Customers and Counterparties.
Receivables from customers and counterparties at fair
value, excluding insurance contracts, are primarily
comprised of transfers of assets accounted for as secured
loans rather than purchases. The significant inputs to the
valuation of such receivables are commodity prices, interest
rates, the amount and timing of expected future cash flows
and funding spreads. As of December 2012, level 3 secured
loans were primarily related to the firm’s European
insurance business, in which a majority stake was sold in
December 2013. See Note 3 for further information about
this sale. The ranges of significant unobservable inputs used
to value the level 3 secured loans are as follows:
As of December 2013:
‰Funding spreads: 40 bps to 477 bps (weighted average:
142 bps)
As of December 2012:
‰Funding spreads: 85 bps to 99 bps (weighted average:
99 bps)
Generally, an increase in funding spreads would result in a
lower fair value measurement.
Receivables from customers and counterparties not
accounted for at fair value are accounted for at amortized
cost net of estimated uncollectible amounts, which
generally approximates fair value. Such receivables are
primarily comprised of customer margin loans and
collateral posted in connection with certain derivative
transactions. While these items are carried at amounts that
approximate fair value, they are not accounted for at fair
value under the fair value option or at fair value in
accordance with other U.S. GAAP and therefore are not
included in the firm’s fair value hierarchy in Notes 6, 7 and
8. Had these items been included in the firm’s fair value
hierarchy, substantially all would have been classified in
level 2 as of December 2013.
Receivables from customers and counterparties not
accounted for at fair value also includes loans held for
investment, which are primarily comprised of collateralized
loans to private wealth management clients and corporate
loans. As of December 2013 and December 2012, the
carrying value of such loans was $14.90 billion and
$6.50 billion, respectively, which generally approximated
fair value. As of December 2013, had these loans been
carried at fair value and included in the fair value hierarchy,
$6.16 billion and $8.75 billion would have been classified
in level 2 and level 3, respectively. As of December 2012,
had these loans been carried at fair value and included in
the fair value hierarchy, $2.41 billion and $4.06 billion
would have been classified in level 2 and
level 3, respectively.
Deposits. The significant inputs to the valuation of time
deposits are interest rates and the amount and timing of
future cash flows. The inputs used to value the embedded
derivative component of hybrid financial instruments are
consistent with the inputs used to value the firm’s other
derivative instruments. See Note 7 for further information
about derivatives. See Note 14 for further information
about deposits.
The firm’s deposits that are included in level 3 are hybrid
financial instruments. As the significant unobservable
inputs used to value hybrid financial instruments primarily
relate to the embedded derivative component of these
deposits, these inputs are incorporated in the firm’s
derivative disclosures related to unobservable inputs in
Note 7.
154 Goldman Sachs 2013 Annual Report