Goldman Sachs 2015 Annual Report Download - page 80

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis
Scenario Analyses. We conduct various scenario analyses
including as part of the Comprehensive Capital Analysis
and Review (CCAR) and Dodd-Frank Act Stress Tests
(DFAST), as well as our resolution and recovery planning.
See “Equity Capital Management and Regulatory
Capital — Equity Capital Management” below for further
information. These scenarios cover short-term and long-
term time horizons using various macroeconomic and firm-
specific assumptions, based on a range of economic
scenarios. We use these analyses to assist us in developing
our longer-term balance sheet management strategy,
including the level and composition of assets, funding and
equity capital. Additionally, these analyses help us develop
approaches for maintaining appropriate funding, liquidity
and capital across a variety of situations, including a
severely stressed environment.
Balance Sheet Allocation
In addition to preparing our consolidated statements of
financial condition in accordance with U.S. GAAP, we
prepare a balance sheet that generally allocates assets to our
businesses, which is a non-GAAP presentation and may not
be comparable to similar non-GAAP presentations used by
other companies. We believe that presenting our assets on
this basis is meaningful because it is consistent with the way
management views and manages risks associated with the
firm’s assets and better enables investors to assess the
liquidity of the firm’s assets.
The table below presents our balance sheet allocation.
As of December
$ in millions 2015 2014
Global Core Liquid Assets (GCLA) $199,120 $182,947
Other cash 9,180 7,805
GCLA and cash 208,300 190,752
Secured client financing 221,325 210,641
Inventory 208,836 230,667
Secured financing agreements 63,495 74,767
Receivables 39,976 47,317
Institutional Client Services 312,307 352,751
Public equity 3,991 4,041
Private equity 16,985 17,979
Debt 123,216 24,768
Loans receivable 245,407 28,938
Other 4,646 3,771
Investing & Lending 94,245 79,497
Total inventory and related assets 406,552 432,248
Other assets 25,218 22,201
Total assets $861,395 $855,842
1. Includes $17.29 billion and $18.24 billion as of December 2015 and
December 2014, respectively, of direct loans primarily extended to corporate
and private wealth management clients that are accounted for at fair value.
2. See Note 9 to the consolidated financial statements for further information
about loans receivable.
The following is a description of the captions in the table
above:
‰Global Core Liquid Assets and Cash. We maintain
liquidity to meet a broad range of potential cash outflows
and collateral needs in a stressed environment. See
“Liquidity Risk Management” below for details on the
composition and sizing of our “Global Core Liquid
Assets” (GCLA). In addition to our GCLA, we maintain
other operating cash balances, primarily for use in specific
currencies, entities, or jurisdictions where we do not have
immediate access to parent company liquidity.
‰Secured Client Financing. We provide collateralized
financing for client positions, including margin loans
secured by client collateral, securities borrowed, and
resale agreements primarily collateralized by government
obligations. As a result of client activities, we are required
to segregate cash and securities to satisfy regulatory
requirements. Our secured client financing arrangements,
which are generally short-term, are accounted for at fair
value or at amounts that approximate fair value, and
include daily margin requirements to mitigate
counterparty credit risk.
‰Institutional Client Services. In Institutional Client
Services, we maintain inventory positions to facilitate
market making in fixed income, equity, currency and
commodity products. Additionally, as part of market-
making activities, we enter into resale or securities
borrowing arrangements to obtain securities which we
can use to cover transactions in which we or our clients
have sold securities that have not yet been purchased. The
receivables in Institutional Client Services primarily relate
to securities transactions.
‰Investing & Lending. In Investing & Lending, we make
investments and originate loans to provide financing to
clients. These investments and loans are typically longer-
term in nature. We make investments, directly and
indirectly through funds and separate accounts that we
manage, in debt securities, loans, public and private
equity securities, real estate entities and other
investments.
‰Other Assets. Other assets are generally less liquid, non-
financial assets, including property, leasehold
improvements and equipment, goodwill and identifiable
intangible assets, income tax-related receivables, equity-
method investments, assets classified as held for sale and
miscellaneous receivables.
68 Goldman Sachs 2015 Form 10-K