Goldman Sachs 2009 Annual Report Download - page 100

Goldman Sachs 2009 Annual Report
98
Notes to Consolidated Financial Statements
Identi able Intangible Assets
Identi able intangible assets, which consist primarily
of customer lists, NewYork Stock Exchange (NYSE)
Designated Market Maker (DMM) rights and the value
of business acquired (VOBA) in the  rm’s insurance
subsidiaries, are amortized over their estimated lives or, in
the case of insurance contracts, in proportion to estimated
gross pro ts or premium revenues. Identi able 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. An impairment
loss, generally 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 estimated
undiscounted cash  ows relating to the asset or asset group
is less than the corresponding carryingvalue.
Property, Leasehold Improvements and Equipment
Property, leasehold improvements and equipment, net of
accumulated depreciation and amortization, are recorded
at cost and included in “Other assets” in the consolidated
statements of  nancial condition.
Substantially all property and equipment are depreciated on
a straight-line basis over the useful life of the asset. Leasehold
improvements are amortized on a straight-line basis over
the useful life of the improvement or the term of the lease,
whichever is shorter. Certain costs of software developed or
obtained for internal use are capitalized and amortized on a
straight-line basis over the useful life of the software.
Property, leasehold improvements and equipment 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. 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  ows relating to the asset or asset
group is less than the corresponding carrying value.
The  rm’s operating leases include of ce space held in excess
of current requirements. Rent expense relating to space held
for growth is included in “Occupancy” in the consolidated
statements of earnings. The  rm records a liability, based on
the fair value of the remaining lease rentals reduced by any
potential or existing sublease rentals, for leases where the  rm
has ceased using the space and management has concluded
that the  rm will not derive any future economic bene ts.
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 statements of  nancial condition, and
revenues and expenses are translated at average rates of
exchange for the period. Gains or losses on translation
of the  nancial statements of a non-U.S. operation, when
the functional currency is other than the U.S. dollar, are
included, net of hedges and taxes, in the consolidated
statements of comprehensive income. The  rm seeks to
reduce its net investment exposure to  uctuations 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; accordingly,
forward points are re ected as a component of the currency
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
Income taxes are provided for using the asset and liability
method. Deferred tax assets and liabilities are recognized for
temporary differences between the  nancial reporting and
tax bases of the  rm’s assets and liabilities. Valuation
allowances are established to reduce deferred tax assets to
the amount that more likely than not will be realized. The
 rm’s tax assets and liabilities are presented as a component
of“Other assets” and “Other liabilities and accrued
expenses,” respectively, in the consolidated statements of
 nancial condition. The  rm adopted amended accounting
principles related to the accounting for uncertainty in income
taxes (ASC 740) as of December 1, 2007, and recorded a
transition adjustment resulting in a reduction of $201million
to beginning retained earnings in the  rst  scal quarter of
2008. The  rm recognizes tax positions in the  nancial
statements only when it is more likely than not that the
position will be sustained upon examination by the relevant
taxing authority based on the technical merits of the position.
A position that meets this standard is measured at the largest
amount of bene t that will more likely than not be realized
upon settlement. A liability is established for differences
between positions taken in a tax return and amounts