Goldman Sachs 2015 Annual Report Download - page 175

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The firm also pledges certain financial instruments owned,
at fair value in connection with repurchase agreements,
securities loaned transactions and other secured financings,
and other assets (primarily real estate and cash) in
connection with other secured financings to counterparties
who may or may not have the right to deliver or repledge
them.
The table below presents financial instruments at fair value
received as collateral that were available to be delivered or
repledged and were delivered or repledged by the firm.
As of December
$ in millions 2015 2014
Collateral available to be delivered
or repledged 1$636,684 $630,046
Collateral that was delivered or repledged 496,240 474,057
1. As of December 2015 and December 2014, amounts exclude $13.40 billion
and $6.04 billion, respectively, of securities received under resale
agreements, and $5.54 billion and $7.08 billion, respectively, of securities
borrowed transactions that contractually had the right to be delivered or
repledged, but were segregated to satisfy certain regulatory requirements.
The table below presents information about assets pledged.
As of December
$ in millions 2015 2014
Financial instruments owned, at fair value
pledged to counterparties that:
Had the right to deliver or repledge $ 54,426 $ 64,473
Did not have the right to deliver or repledge 63,880 68,027
Other assets pledged to counterparties that:
Did not have the right to deliver or repledge 1,841 1,304
Note 11.
Securitization Activities
The firm securitizes residential and commercial mortgages,
corporate bonds, loans and other types of financial assets
by selling these assets to securitization vehicles (e.g., trusts,
corporate entities and limited liability companies) or
through a resecuritization. The firm acts as underwriter of
the beneficial interests that are sold to investors. The firm’s
residential mortgage securitizations are primarily in
connection with government agency securitizations.
Beneficial interests issued by securitization entities are debt
or equity securities that give the investors rights to receive
all or portions of specified cash inflows to a securitization
vehicle and include senior and subordinated interests in
principal, interest and/or other cash inflows. The proceeds
from the sale of beneficial interests are used to pay the
transferor for the financial assets sold to the securitization
vehicle or to purchase securities which serve as collateral.
The firm accounts for a securitization as a sale when it has
relinquished control over the transferred assets. Prior to
securitization, the firm accounts for assets pending transfer
at fair value and therefore does not typically recognize
significant gains or losses upon the transfer of assets. Net
revenues from underwriting activities are recognized in
connection with the sales of the underlying beneficial
interests to investors.
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 Notes 10 and 23 for further
information about collateralized financings and interest
expense, respectively.
The firm generally receives cash in exchange for the
transferred assets but may also have continuing
involvement with transferred assets, including ownership of
beneficial interests in securitized financial assets, primarily
in the form of senior or subordinated securities. The firm
may also purchase senior or subordinated securities issued
by securitization vehicles (which are typically VIEs) in
connection with secondary market-making activities.
The primary risks included in beneficial interests and other
interests from the firm’s continuing involvement with
securitization vehicles are the performance of the
underlying collateral, the position of the firm’s investment
in the capital structure of the securitization vehicle and the
market yield for the security. Substantially all of these
interests are accounted for at fair value, are included in
“Financial instruments owned, at fair value” and are
classified in level 2 of the fair value hierarchy. See Notes 5
through 8 for further information about fair value
measurements.
Goldman Sachs 2015 Form 10-K 163