Goldman Sachs 2015 Annual Report Download - page 207

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Note 25.
Business Segments
The firm reports its activities in the following four business
segments: Investment Banking, Institutional Client Services,
Investing & Lending and Investment Management.
Basis of Presentation
In reporting segments, certain of the firm’s business lines
have been aggregated where they have similar economic
characteristics and are similar in each of the following
areas: (i) the nature of the services they provide, (ii) their
methods of distribution, (iii) the types of clients they serve
and (iv) the regulatory environments in which they operate.
The cost drivers of the firm taken as a whole —
compensation, headcount and levels of business activity —
are broadly similar in each of the firm’s business segments.
Compensation and benefits expenses in the firm’s segments
reflect, among other factors, the overall performance of the
firm as well as the performance of individual businesses.
Consequently, pre-tax margins in one segment of the firm’s
business may be significantly affected by the performance
of the firm’s other business segments.
The firm allocates assets (including allocations of global
core liquid assets and cash, secured client financing and
other assets), revenues and expenses among the four
business segments. Due to the integrated nature of these
segments, estimates and judgments are made in allocating
certain assets, revenues and expenses. The allocation
process is based on the manner in which management
currently views the performance of the segments.
Transactions between segments are based on specific
criteria or approximate third-party rates. Total operating
expenses include charitable contributions that have not
been allocated to individual business segments.
Management believes that the information in the table
below provides a reasonable representation of each
segment’s contribution to consolidated pre-tax earnings
and total assets.
Year Ended or as of December
$ in millions 2015 2014 2013
Investment Banking
Financial Advisory $ 3,470 $ 2,474 $ 1,978
Equity underwriting 1,546 1,750 1,659
Debt underwriting 2,011 2,240 2,367
Total Underwriting 3,557 3,990 4,026
Total net revenues 7,027 6,464 6,004
Operating expenses 3,713 3,688 3,479
Pre-tax earnings $ 3,314 $ 2,776 $ 2,525
Segment assets $ 2,564 $ 1,844 $ 1,900
Institutional Client Services
Fixed Income, Currency and
Commodities Client Execution $ 7,322 $ 8,461 $ 8,651
Equities client execution 3,028 2,079 2,594
Commissions and fees 3,156 3,153 3,103
Securities services 1,645 1,504 1,373
Total Equities 7,829 6,736 7,070
Total net revenues 15,151 15,197 15,721 4
Operating expenses 13,938 10,880 11,792
Pre-tax earnings $ 1,213 $ 4,317 $ 3,929
Segment assets $663,394 $695,674 $787,896
Investing & Lending
Equity securities $ 3,781 $ 4,579 $ 4,974
Debt securities and loans 1,655 2,246 2,044
Total net revenues 15,436 6,825 7,018
Operating expenses 2,402 2,819 2,686
Pre-tax earnings $ 3,034 $ 4,006 $ 4,332
Segment assets $179,428 $143,790 $109,250
Investment Management
Management and other fees $ 4,887 $ 4,800 $ 4,386
Incentive fees 780 776 662
Transaction revenues 539 466 415
Total net revenues 6,206 6,042 5,463
Operating expenses 4,841 4,647 4,357
Pre-tax earnings $ 1,365 $ 1,395 $ 1,106
Segment assets $ 16,009 $ 14,534 $ 12,078
Total net revenues $ 33,820 $ 34,528 $ 34,206
Total operating expenses 2, 3 25,042 22,171 22,469
Total pre-tax earnings $ 8,778 $ 12,357 $ 11,737
Total assets $861,395 $855,842 $911,124
1. Net revenues related to the firm’s consolidated investments, previously
reported in other net revenues within Investing & Lending, are now reported
in equity securities and debt securities and loans, as results from these
activities ($391 million for 2015) are no longer significant principally due to
the sale of Metro in the fourth quarter of 2014. Reclassifications have been
made to previously reported amounts to conform to the current presentation.
2. Includes net provisions for litigation and regulatory proceedings of
$4.01 billion (of which $3.37 billion was related to the agreement in principle
with the RMBS Working Group) for 2015, $754 million for 2014 and
$962 million for 2013. See Note 27 for further information about this
agreement in principle.
3. Includes charitable contributions that have not been allocated to the firm’s
segments of $148 million for 2015, $137 million for 2014 and $155 million for
2013.
4. Includes $37 million of realized gains on available-for-sale securities.
Goldman Sachs 2015 Form 10-K 195