Goldman Sachs 2015 Annual Report Download - page 137

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Offsetting Assets and Liabilities
To reduce credit exposures on derivatives and securities
financing transactions, the firm may enter into master
netting agreements or similar arrangements (collectively,
netting agreements) with counterparties that permit it to
offset receivables and payables with such counterparties. A
netting agreement is a contract with a counterparty that
permits net settlement of multiple transactions with that
counterparty, including upon the exercise of termination
rights by a non-defaulting party. Upon exercise of such
termination rights, all transactions governed by the netting
agreement are terminated and a net settlement amount is
calculated. In addition, the firm receives and posts cash and
securities collateral with respect to its derivatives and
securities financing transactions, subject to the terms of the
related credit support agreements or similar arrangements
(collectively, credit support agreements). An enforceable
credit support agreement grants the non-defaulting party
exercising termination rights the right to liquidate the
collateral and apply the proceeds to any amounts owed. In
order to assess enforceability of the firm’s right of setoff
under netting and credit support agreements, the firm
evaluates various factors including applicable bankruptcy
laws, local statutes and regulatory provisions in the
jurisdiction of the parties to the agreement.
Derivatives are reported on a net-by-counterparty basis
(i.e., the net payable or receivable for derivative assets and
liabilities for a given counterparty) in the consolidated
statements of financial condition when a legal right of setoff
exists under an enforceable netting agreement. Resale and
repurchase agreements and securities borrowed and loaned
transactions with the same term and currency are presented
on a net-by-counterparty basis in the consolidated
statements of financial condition when such transactions
meet certain settlement criteria and are subject to netting
agreements.
In the consolidated statements of financial condition,
derivatives are reported net of cash collateral received and
posted under enforceable credit support agreements, when
transacted under an enforceable netting agreement. In the
consolidated statements of financial condition, resale and
repurchase agreements, and securities borrowed and
loaned, are not reported net of the related cash and
securities received or posted as collateral. See Note 10 for
further information about collateral received and pledged,
including rights to deliver or repledge collateral. See
Notes 7 and 10 for further information about offsetting.
Foreign Currency Translation
Assets and liabilities denominated in non-U.S. currencies
are translated at rates of exchange prevailing on the date of
the consolidated statements of financial condition and
revenues and expenses are translated at average rates of
exchange for the period. Foreign currency remeasurement
gains or losses on transactions in nonfunctional currencies
are recognized in earnings. Gains or losses on translation of
the financial statements of a non-U.S. operation, when the
functional currency is other than the U.S. dollar, are
included, net of hedges and taxes, in the consolidated
statements of comprehensive income.
Recent Accounting Developments
Reporting Discontinued Operations and Disclosures
of Disposals of Components of an Entity (ASC 205 and
ASC 360). In April 2014, the FASB issued ASU No. 2014-
08, “Presentation of Financial Statements (Topic 205) and
Property, Plant, and Equipment (Topic 360) — Reporting
Discontinued Operations and Disclosures of Disposals of
Components of an Entity.” ASU No. 2014-08 limits
discontinued operations reporting to disposals of
components of an entity that represent strategic shifts that
have (or will have) a major effect on an entity’s operations
and financial results. The ASU requires expanded
disclosures for discontinued operations and disposals of
individually significant components of an entity that do not
qualify for discontinued operations reporting. The ASU was
effective for disposals and components classified as held for
sale that occurred within annual periods beginning on or
after December 15, 2014, and interim periods within those
years. Early adoption was permitted. The firm early
adopted ASU No. 2014-08 in 2014 and adoption did not
materially affect the firm’s financial condition, results of
operations, or cash flows.
Revenue from Contracts with Customers (ASC 606).
In May 2014, the FASB issued ASU No. 2014-09,
“Revenue from Contracts with Customers (Topic 606).”
ASU No. 2014-09 provides comprehensive guidance on the
recognition of revenue from customers arising from the
transfer of goods and services. The ASU also provides
guidance on accounting for certain contract costs, and
requires new disclosures. ASU No. 2014-09, as amended in
August 2015 by ASU No. 2015-14, is effective for annual
reporting periods beginning after December 15, 2017,
including interim periods within that reporting period.
Early adoption is permitted for annual reporting periods
beginning after December 15, 2016. The firm is still
evaluating the effect of the ASU on its financial condition,
results of operations, and cash flows.
Goldman Sachs 2015 Form 10-K 125