Goldman Sachs 2015 Annual Report Download - page 167

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Gains and Losses on Financial Assets and Financial
Liabilities Accounted for at Fair Value Under the
Fair Value Option
The table below presents the gains and losses recognized as
a result of the firm electing to apply the fair value option to
certain financial assets and financial liabilities. These gains
and losses are included in “Market making” and “Other
principal transactions.” The table below also includes gains
and losses on the embedded derivative component of hybrid
financial instruments included in unsecured short-term
borrowings, unsecured long-term borrowings and deposits.
These gains and losses would have been recognized under
other U.S. GAAP even if the firm had not elected to account
for the entire hybrid financial instrument at fair value.
The amounts in the table exclude contractual interest,
which is included in “Interest income” and “Interest
expense,” for all instruments other than hybrid financial
instruments. See Note 23 for further information about
interest income and interest expense.
Gains/(Losses) on Financial Assets
and Financial Liabilities at
Fair Value Under the Fair Value Option
Year Ended December
$ in millions 2015 2014 2013
Unsecured short-term borrowings 1$ 346 $(1,180) $(1,145)
Unsecured long-term borrowings 2771 (592) 683
Other liabilities and accrued
expenses 3(684) (441) (167)
Other 4(217) (366) (443)
Total $ 216 $(2,579) $(1,072)
1. Includes gains/(losses) on the embedded derivative component of hybrid
financial instruments of $339 million for 2015, $(1.22) billion for 2014 and
$(1.04) billion for 2013, respectively.
2. Includes gains/(losses) on the embedded derivative component of hybrid
financial instruments of $653 million for 2015, $(697) million for 2014 and
$902 million for 2013, respectively.
3. Includes gains/(losses) on certain subordinated liabilities issued by
consolidated VIEs. Gains/(losses) for 2013 also includes gains on certain
insurance contracts.
4. Primarily consists of gains/(losses) on resale and repurchase agreements,
securities borrowed, receivables from customers and counterparties,
deposits and other secured financings.
Excluding the gains and losses on the instruments
accounted for under the fair value option described above,
“Market making” and “Other principal transactions”
primarily represent gains and losses on “Financial
instruments owned, at fair value” and “Financial
instruments sold, but not yet purchased, at fair value.”
Loans and Lending Commitments
The table below presents the difference between the
aggregate fair value and the aggregate contractual principal
amount for loans and long-term receivables for which the
fair value option was elected.
As of December
$ in millions 2015 2014
Performing loans and long-term receivables
Aggregate contractual principal in excess of the
related fair value $1,330 $1,699
Loans on nonaccrual status and/or more than
90 days past due 1
Aggregate contractual principal in excess of the
related fair value (excluding loans carried at zero
fair value and considered uncollectible) 9,600 13,106
Aggregate fair value of loans on nonaccrual status
and/or more than 90 days past due 2,391 3,333
1. The aggregate contractual principal amount of these loans exceeds the
related fair value primarily because the firm regularly purchases loans, such
as distressed loans, at values significantly below contractual principal
amounts.
As of December 2015 and December 2014, the fair value of
unfunded lending commitments for which the fair value
option was elected was a liability of $211 million and
$402 million, respectively, and the related total contractual
amount of these lending commitments was $14.01 billion
and $26.19 billion, respectively. See Note 18 for further
information about lending commitments.
Long-Term Debt Instruments
The aggregate contractual principal amount of long-term
other secured financings for which the fair value option was
elected exceeded the related fair value by $362 million and
$203 million as of December 2015 and December 2014,
respectively. The aggregate contractual principal amount of
unsecured long-term borrowings for which the fair value
option was elected exceeded the related fair value by
$1.12 billion and $163 million as of December 2015 and
December 2014, respectively. The amounts above include
both principal and non-principal-protected long-term
borrowings.
Impact of Credit Spreads on Loans and Lending
Commitments
The estimated net gain attributable to changes in
instrument-specific credit spreads on loans and lending
commitments for which the fair value option was elected
was $751 million for 2015, $1.83 billion for 2014 and
$2.69 billion for 2013, respectively. Changes in the fair
value of loans and lending commitments are primarily
attributable to changes in instrument-specific credit
spreads. Substantially all of the firm’s performing loans and
lending commitments are floating-rate.
Goldman Sachs 2015 Form 10-K 155