Goldman Sachs 2002 Annual Report Download - page 60

RECENT ACCOUNTING DEVELOPMENTS
In June 2002, the FASB issued SFAS No. 146,
“Accounting for Costs Associated with Exit or Disposal
Activities.” The statement specifies the accounting for
certain employee termination benefits, contract termina-
tion costs and costs to consolidate facilities or relocate
employees and is effective for exit and disposal activities
initiated after December 31, 2002. We do not expect the
statement to have a material effect on our financial con-
dition or results of operations.
Effective in fiscal 2003, we will begin to account for
stock-based employee compensation in accordance with
the fair-value method prescribed by SFAS No. 123,
“Accounting for Stock-Based Compensation,” as
amended by SFAS No. 148, “Accounting for Stock-Based
Compensation—Transition and Disclosure,” using the
prospective adoption method. Under this method of
adoption, compensation expense will be recognized
based on the fair value of stock options and restricted
stock units granted for fiscal 2003 and future years over
the related service period while stock options and
restricted stock units granted for fiscal 2002 and prior
years, unless modified, will continue to be accounted for
under Accounting Principles Board Opinion No. 25,
“Accounting for Stock Issued to Employees,” generally
resulting in no recognition of compensation expense
related to stock options granted with no intrinsic value.
The amount of stock-based compensation to be recog-
nized under SFAS No. 123 in fiscal 2003 and beyond is
not currently determinable because the number and value
of stock options and/or restricted stock units to be
granted to employees in the future is not yet known, nor
are the related future service provisions. We elected to
adopt the disclosure provisions of SFAS No. 148 for the
fiscal year-ended 2002. See Note 2 and Note 12 to the
consolidated financial statements for additional informa-
tion on our stock-based compensation.
In November 2002, the FASB issued FIN No. 45,
“Guarantor’s Accounting and Disclosure Requirements
for Guarantees, Including Indirect Guarantees of
Indebtedness of Others.” FIN No. 45 specifies the disclo-
sures to be made about obligations under certain issued
guarantees and requires a liability to be recognized for
the fair value of a guarantee obligation. The recognition
and measurement provisions of the interpretation apply
prospectively to guarantees issued after December 31,
2002. The disclosure provisions are effective beginning
with our first fiscal quarter in 2003. Adoption of the
recognition and measurement provisions will not have
a material effect on our financial condition or results
of operations.
In January 2003, the FASB issued FIN No. 46,
“Consolidation of Variable Interest Entities.” FIN No. 46
requires a company to consolidate a variable interest
entity (VIE) if the company has variable interests that
give it a majority of the expected losses or a majority of
the expected residual returns of the entity. Prior to FIN
No. 46, VIEs were commonly referred to as SPEs. FIN
No. 46 is effective immediately for VIEs created after
January 31, 2003. Goldman Sachs must apply FIN
No. 46 to VIEs created before February 1, 2003 as of the
beginning of the fiscal 2003 fourth quarter. We are eval-
uating the impact of adoption but do not expect it to
have a material effect on our financial condition or
results of operations. We have disclosed information
about our VIEs in Note 4 to the consolidated financial
statements.
Managem ent’s D iscussion and A nalysis
GO L D M A N SA CH S 2002 A N N UAL R EPO RT 57