Goldman Sachs 2004 Annual Report Download - page 83

GOLDMAN฀SAC H S ฀ 2004฀ A N N U A L ฀ R E P ORT ฀ ฀ ฀ 8 1
notes฀to฀consolidated฀financial฀statements
GOLDMAN฀SAC H S ฀ 2004฀ A N N U A L ฀ R E P ORT ฀ ฀ ฀ 8 1
Property, leasehold improvements and equipment are tested for
potential impairment whenever events or changes in circum-
stances suggest that an asset’s or asset group’s carrying value
may not be fully recoverable in accordance with SFAS No. 144.
An impairment loss, calculated as the difference between the
estimated fair value and the carrying value of an asset or asset
group, is recognized if the sum of the expected undiscounted
cash flows relating to the asset or asset group is less than the
corresponding carrying value.
The firm’s operating leases include space held in excess of cur-
rent needs. Rent expense relating to space held for growth is
included in “Occupancy” in the consolidated statements of
earnings. In accordance with SFAS No. 146, “Accounting for
Costs Associated with Exit or Disposal Activities,” the firm
records a liability, based on the remaining lease rentals reduced
by any potential or existing sublease rentals, for leases where
the firm has ceased using the space and management has con-
cluded that the firm will not derive any future economic bene-
fits. Costs to terminate a lease before the end of its term are
recognized and measured at fair value upon termination.
FOREIGN฀CURRENCY฀ TRANSLATION
Assets and liabilities denominated in non-U.S. currencies are
translated at rates of exchange prevailing on the date of the
consolidated statement of financial condition, and revenues and
expenses are translated at average rates of exchange for the
fiscal year. Gains or losses on translation of the financial state-
ments of a non-U.S. operation, when the functional currency is
other than the U.S. dollar, are included, net of hedges and taxes,
on the consolidated statements of comprehensive income. The
firm seeks to reduce its net investment exposure to fluctuations
in foreign exchange rates through the use of foreign currency
forward contracts and foreign currency denominated debt. For
foreign currency forward contracts, hedge effectiveness is
assessed based on changes in forward exchange rates; accord-
ingly, forward points are reflected as a component of the cur-
rency translation adjustment in the consolidated statements of
comprehensive income. For foreign currency denominated debt,
hedge effectiveness is assessed based on changes in spot rates.
Foreign currency remeasurement gains or losses on transactions
in nonfunctional currencies are included in the consolidated
statements of earnings.
INCOME฀TAXES
Deferred tax assets and liabilities are recognized for temporary
differences between the financial reporting and tax bases of the
firm’s assets and liabilities. Valuation allowances are estab-
lished to reduce deferred tax assets to the amount that more
likely than not will be realized. The firm’s tax assets and liabil-
ities are presented as a component of “Other assets” and
“Other liabilities and accrued expenses,” respectively, in the
consolidated statements of financial condition. Tax provisions
are computed in accordance with SFAS No. 109, “Accounting
for Income Taxes.” Contingent liabilities related to income
taxes are recorded when the criteria for loss recognition under
SFAS No. 5, “Accounting for Contingencies,” as amended,
have been met.
EARNINGS฀PER฀ SHARE
Basic EPS is calculated by dividing net earnings by the weighted
average number of common shares outstanding. Common
shares outstanding includes common stock and restricted stock
units for which no future service is required as a condition to
the delivery of the underlying common stock. Diluted EPS
includes the determinants of basic EPS and, in addition, reflects
PROPERTY,฀ LEASEHOLD฀ IMPROVEMENTS฀ AND฀EQUIPMENT
Property, leasehold improvements and equipment, net of accumulated depreciation and amortization, are included in “Other assets”
in the consolidated statements of financial condition. Effective December 1, 2001, the firm changed to the straight-line method of
depreciation for certain property, leasehold improvements and equipment placed in service on or after December 1, 2001.
The firm’s depreciation and amortization is computed using the methods set forth below:
฀ ฀ PROPERTY฀AND฀ ฀ ฀ CERTAIN฀INTERNAL฀USE
฀ ฀ EQUIPMENT฀ LEASEHOLD฀IMPROVEMENTS฀ SOFTWARE฀COSTS
฀ TERM฀OF฀LEASE฀฀ TERM฀OF฀LEASE฀฀
฀ GREATER฀THAN฀฀ LESS฀THAN฀฀
฀ USEFUL฀LIFE฀ USEFUL฀LIFE฀
Placed in service Accelerated cost Accelerated cost Straight-line over Straight-line over
prior to December 1, 2001 recovery recovery the term of the the useful life of
lease the asset
Placed in service on Straight-line over Straight-line over Straight-line over Straight-line over
or after December 1, 2001 the useful life of the useful life of the term of the the useful life of
the asset the asset lease the asset
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