Goldman Sachs 2015 Annual Report Download - page 66

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis
Identifiable Intangible Assets. We amortize our
identifiable intangible assets over their estimated useful
lives using the straight-line method or based on economic
usage for certain commodities-related intangibles.
Identifiable intangible assets are tested for impairment
whenever events or changes in circumstances suggest that
an asset’s or asset group’s carrying value may not be fully
recoverable. See Note 13 to the consolidated financial
statements for the carrying value and estimated remaining
useful lives of our identifiable intangible assets by major
asset class.
A prolonged or severe period of market weakness, or
significant changes in regulation could adversely impact our
businesses and impair the value of our identifiable
intangible assets. In addition, certain events could indicate a
potential impairment of our identifiable intangible assets,
including weaker business performance resulting in a
decrease in our customer base and decreases in revenues
from commodities-related transportation rights, customer
contracts and relationships. Management judgment is
required to evaluate whether indications of potential
impairment have occurred, and to test intangible assets for
impairment if required.
An impairment, generally calculated as the difference
between the estimated fair value and the carrying value of
an asset or asset group, is recognized if the total of the
estimated undiscounted cash flows relating to the asset or
asset group is less than the corresponding carrying value.
See Note 13 to the consolidated financial statements for
further information about our identifiable intangible assets.
Recent Accounting Developments
See Note 3 to the consolidated financial statements for
information about Recent Accounting Developments.
Use of Estimates
The use of generally accepted accounting principles requires
management to make certain estimates and assumptions. In
addition to the estimates we make in connection with fair
value measurements and the accounting for goodwill and
identifiable intangible assets, the use of estimates and
assumptions is also important in determining provisions for
losses that may arise from litigation, regulatory proceedings
and tax audits, and the allowance for losses on loans and
lending commitments held for investment.
We estimate and provide for potential losses that may arise
out of litigation and regulatory proceedings to the extent
that such losses are probable and can be reasonably
estimated. In addition, we estimate the upper end of the
range of reasonably possible aggregate loss in excess of the
related reserves for litigation proceedings where the firm
believes the risk of loss is more than slight. See Notes 18
and 27 to the consolidated financial statements for
information about certain judicial, regulatory and legal
proceedings.
Significant judgment is required in making these estimates
and our final liabilities may ultimately be materially
different. Our total estimated liability in respect of litigation
and regulatory proceedings is determined on a case-by-case
basis and represents an estimate of probable losses after
considering, among other factors, the progress of each case
or proceeding, our experience and the experience of others
in similar cases or proceedings, and the opinions and views
of legal counsel.
In accounting for income taxes, we recognize tax positions
in the financial statements only when it is more likely than
not that the position will be sustained on examination by
the relevant taxing authority based on the technical merits
of the position. See Note 24 to the consolidated financial
statements for further information about accounting for
income taxes.
We also estimate and record an allowance for credit losses
related to our loans receivable and lending commitments
held for investment. Management’s estimate of loan losses
entails judgment about loan collectability at the reporting
dates, and there are uncertainties inherent in those
judgments. See Note 9 to the consolidated financial
statements for further information about the allowance for
losses on loans and lending commitments held for
investment.
54 Goldman Sachs 2015 Form 10-K