Goldman Sachs 2009 Annual Report Download - page 109

Download and view the complete annual report

Please find page 109 of the 2009 Goldman Sachs annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 180

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150
  • 151
  • 152
  • 153
  • 154
  • 155
  • 156
  • 157
  • 158
  • 159
  • 160
  • 161
  • 162
  • 163
  • 164
  • 165
  • 166
  • 167
  • 168
  • 169
  • 170
  • 171
  • 172
  • 173
  • 174
  • 175
  • 176
  • 177
  • 178
  • 179
  • 180

Goldman Sachs 2009 Annual Report
107
Notes to Consolidated Financial Statements
Cash Instruments
The net unrealized loss on level3 cash instruments of
$4.31billion for the year ended December2009 primarily
consisted of unrealized losses on private equity investments
and real estate fund investments, and loans and securities
backed by commercial real estate, re ecting weakness in
these less liquid asset classes. The net unrealized loss on
level3 cash instruments of $12.36billion for the year ended
November2008 primarily consisted of unrealized losses on
loans and securities backed by commercial real estate, certain
bank loans and bridge loans, private equity investments
and real estate fund investments. The net unrealized loss on
level3 cash instruments of $3.19billion for the one month
ended December2008 primarily consisted of unrealized
losses on certain bank loans and bridge loans, private equity
investments and real estate fund investments, and loans and
securities backed by commercial real estate. Losses during
December2008 re ected the weakness in the global credit and
equitymarkets.
Level3 cash instruments are frequently economically hedged
with instruments classi ed within level1 and level2, and
accordingly, gains or losses that have been reported in level3
can be partially offset by gains or losses attributable to
instruments classi ed within level1 or level2 or by gains or
losses on derivative contracts classi ed within level3 of the
fair value hierarchy.
Derivative Contracts
The net unrealized loss on level3 derivative contracts of
$1.02billion for the year ended December2009 was primarily
attributable to tighter credit spreads on the underlying
instruments and increases in underlying equity index prices,
partially offset by increases in commodities prices (all of
which are level2 observable inputs). The net unrealized gain
on level3 derivative contracts of $5.58billion for the year
ended November2008 was primarily attributable to changes
in observable credit spreads (which are level2 inputs) on the
underlying instruments. The net unrealized loss on level3
derivative contracts of $210million for the one month ended
December2008 was primarily attributable to changes in
observable prices on the underlying instruments (which are
level2 inputs). Level3 gains and losses on derivative contracts
should be considered in the context of the following:
▪
A derivative contract with level1 and/or level2 inputs is
classi ed as a level3  nancial instrument in its entirety if it
has at least one signi cant level3 input.
▪
If there is one signi cant level3 input, the entire gain or
loss from adjusting only observable inputs (i.e.,level1 and
level2) is still classi ed as level3.
▪
Gains or losses that have been reported in level3 resulting
from changes in level1 or level2 inputs are frequently
offset by gains or losses attributable to instruments
classi ed within level1 or level2 or by cash instruments
reportedwithin level3 of the fair value hierarchy.