Goldman Sachs 2015 Annual Report Download - page 166

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Level 3 Rollforward Commentary
Year Ended December 2015. The net unrealized gain on
level 3 other financial assets and liabilities of $785 million
(reflecting $2 million of gains on other financial assets and
$783 million of gains on other financial liabilities) for 2015
primarily reflected gains on certain hybrid financial
instruments included in unsecured short-term and long-
term borrowings, principally due to a decrease in global
equity prices, the impact of wider credit spreads, and
changes in interest and foreign exchange rates.
Transfers into level 3 of other financial liabilities during
2015 primarily reflected transfers of certain hybrid
financial instruments included in unsecured short-term and
long-term borrowings from level 2, principally due to
reduced transparency of certain correlation and volatility
inputs used to value these instruments, and transfers from
level 3 unsecured long-term borrowings to level 3
unsecured short-term borrowings, as these borrowings
neared maturity.
Transfers out of level 3 of other financial liabilities during
2015 primarily reflected transfers of certain hybrid
financial instruments included in unsecured short-term and
long-term borrowings and certain other secured financings
to level 2, principally due to increased transparency of
certain correlation, volatility and funding spread inputs
used to value these instruments, transfers to level 3
unsecured short-term borrowings from level 3 unsecured
long-term borrowings, as these borrowings neared
maturity, and transfers of certain subordinated liabilities
included in other liabilities and accrued expenses to level 2,
principally due to increased price transparency as a result of
market transactions in the related underlying investments.
Year Ended December 2014. The net unrealized loss on
level 3 other financial assets and liabilities of $621 million
(reflecting $2 million of gains on other financial assets and
$623 million of losses on other financial liabilities) for 2014
primarily reflected losses on certain subordinated liabilities
included in other liabilities and accrued expenses,
principally due to changes in the market value of the related
underlying investments, and certain hybrid financial
instruments included in unsecured short-term borrowings,
principally due to an increase in global equity prices.
Transfers out of level 3 of other financial assets during 2014
primarily reflected transfers of certain secured loans
included in receivables from customers and counterparties
to level 2, principally due to unobservable inputs not being
significant to the net risk of the portfolio.
Transfers into level 3 of other financial liabilities during
2014 primarily reflected transfers of certain hybrid
financial instruments included in unsecured long-term and
short-term borrowings from level 2, principally due to
unobservable inputs being significant to the valuation of
these instruments, and transfers from level 3 unsecured
long-term borrowings to level 3 unsecured short-term
borrowings, as these borrowings neared maturity.
Transfers out of level 3 of other financial liabilities during
2014 primarily reflected transfers of certain hybrid
financial instruments included in unsecured long-term and
short-term borrowings to level 2, principally due to
increased transparency of certain correlation and volatility
inputs used to value these instruments, transfers of certain
other hybrid financial instruments included in unsecured
short-term borrowings to level 2, principally due to certain
unobservable inputs not being significant to the valuation
of these hybrid financial instruments, and transfers to
level 3 unsecured short-term borrowings from level 3
unsecured long-term borrowings, as these borrowings
neared maturity.
154 Goldman Sachs 2015 Form 10-K