Goldman Sachs 2015 Annual Report Download - page 163

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Resale and Repurchase Agreements and Securities
Borrowed and Loaned. The significant inputs to the
valuation of resale and repurchase agreements and
securities borrowed and loaned are funding spreads, the
amount and timing of expected future cash flows and
interest rates. As of both December 2015 and
December 2014, the firm had no level 3 resale agreements,
securities borrowed or securities loaned. As of both
December 2015 and December 2014, the firm’s level 3
repurchase agreements were not material. See Note 10 for
further information about collateralized agreements and
financings.
Other Secured Financings. The significant inputs to the
valuation of other secured financings at fair value are the
amount and timing of expected future cash flows, interest
rates, funding spreads, the fair value of the collateral
delivered by the firm (which is determined using the
amount and timing of expected future cash flows, market
prices, market yields and recovery assumptions) and the
frequency of additional collateral calls. The ranges of
significant unobservable inputs used to value level 3 other
secured financings are as follows:
As of December 2015:
‰Yield: 0.6% to 10.0% (weighted average: 2.7%)
‰Duration: 1.6 to 8.8 years (weighted average: 2.8 years)
As of December 2014:
‰Funding spreads: 210 bps to 325 bps (weighted average:
278 bps)
‰Yield: 1.1% to 10.0% (weighted average: 3.1%)
‰Duration: 0.7 to 3.8 years (weighted average: 2.6 years)
Generally, increases in funding spreads, yield or duration,
in isolation, would result in a lower fair value
measurement. Due to the distinctive nature of each of the
firm’s level 3 other secured financings, the interrelationship
of inputs is not necessarily uniform across such financings.
See Note 10 for further information about collateralized
agreements and financings.
Unsecured Short-term and Long-term Borrowings.
The significant inputs to the valuation of unsecured short-
term and long-term borrowings at fair value are the amount
and timing of expected future cash flows, interest rates, the
credit spreads of the firm, as well as commodity prices in
the case of prepaid commodity transactions. 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 Notes 15 and 16
for further information about unsecured short-term and
long-term borrowings, respectively.
Certain of the firm’s unsecured short-term and long-term
instruments are included in level 3, substantially all of
which are hybrid financial instruments. As the significant
unobservable inputs used to value hybrid financial
instruments primarily relate to the embedded derivative
component of these borrowings, these inputs are
incorporated in the firm’s derivative disclosures related to
unobservable inputs in Note 7.
Receivables from Customers and Counterparties.
Receivables from customers and counterparties at fair value
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 both
December 2015 and December 2014, the firm’s level 3
receivables from customers and counterparties were not
material.
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.
Goldman Sachs 2015 Form 10-K 151