Goldman Sachs 2015 Annual Report Download - page 136

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Commissions and Fees. The firm earns “Commissions
and fees” from executing and clearing client transactions on
stock, options and futures markets, as well as over-the-
counter (OTC) transactions. Commissions and fees are
recognized on the day the trade is executed.
Transfers of Assets
Transfers of assets are accounted for as sales when the firm
has relinquished control over the assets transferred. For
transfers of assets accounted for as sales, any gains or losses
are recognized in net revenues. Assets or liabilities that arise
from the firm’s continuing involvement with transferred
assets are recognized at fair value. For transfers of assets
that are not accounted for as sales, the assets remain in
“Financial instruments owned, at fair value” and the
transfer is accounted for as a collateralized financing, with
the related interest expense recognized over the life of the
transaction. See Note 10 for further information about
transfers of assets accounted for as collateralized financings
and Note 11 for further information about transfers of
assets accounted for as sales.
Cash and Cash Equivalents
The firm defines cash equivalents as highly liquid overnight
deposits held in the ordinary course of business. As of
December 2015 and December 2014, “Cash and cash
equivalents” included $6.47 billion and $5.79 billion,
respectively, of cash and due from banks, and
$68.64 billion and $51.81 billion, respectively, of interest-
bearing deposits with banks.
Receivables from and Payables to Brokers, Dealers
and Clearing Organizations
Receivables from and payables to brokers, dealers and
clearing organizations are accounted for at cost plus
accrued interest, which generally approximates fair value.
While these receivables and payables 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
through 8. Had these receivables and payables been
included in the firm’s fair value hierarchy, substantially all
would have been classified in level 2 as of December 2015
and December 2014.
Receivables from Customers and Counterparties
Receivables from customers and counterparties generally
relate to collateralized transactions. Such receivables are
primarily comprised of customer margin loans, certain
transfers of assets accounted for as secured loans rather
than purchases at fair value and collateral posted in
connection with certain derivative transactions.
Substantially all of these receivables are accounted for at
amortized cost net of estimated uncollectible amounts.
Certain of the firm’s receivables from customers and
counterparties are accounted for at fair value under the fair
value option, with changes in fair value generally included
in “Market making” revenues. See Note 8 for further
information about receivables from customers and
counterparties accounted for at fair value under the fair
value option. In addition, as of December 2015 and
December 2014, the firm’s receivables from customers and
counterparties included $2.35 billion and $400 million,
respectively, of loans held for sale, accounted for at the
lower of cost or fair value. See Note 5 for an overview of the
firm’s fair value measurement policies.
As of December 2015 and December 2014, the carrying
value of receivables not accounted for at fair value generally
approximated fair value. 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 through 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 2015 and
December 2014. Interest on receivables from customers and
counterparties is recognized over the life of the transaction
and included in “Interest income.”
Payables to Customers and Counterparties
Payables to customers and counterparties primarily consist
of customer credit balances related to the firm’s prime
brokerage activities. Payables to customers and
counterparties are accounted for at cost plus accrued
interest, which generally approximates fair value. While
these payables 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 through 8. Had these payables been
included in the firm’s fair value hierarchy, substantially all
would have been classified in level 2 as of December 2015
and December 2014. Interest on payables to customers and
counterparties is recognized over the life of the transaction
and included in “Interest expense.”
124 Goldman Sachs 2015 Form 10-K