Goldman Sachs 2009 Annual Report Download - page 41

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Critical Accounting Policies
Fair Value
The use of fair value to measure  nancial instruments, with related gains or losses generally recognized in “Trading and principal
investments” in our consolidated statements of earnings, is fundamental to our  nancial statements and our risk management
processes and is our most critical accounting policy. The fair value of a  nancial instrument is the amount that would be
received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement
date (i.e.,the exit price). Financial assets are marked to bid prices and  nancial liabilities are marked to offer prices. Fair value
measurements do not include transaction costs.
Substantially all trading assets and trading liabilities are re ected in our consolidated statements of  nancial condition at
fair value. In determining fair value, we separate our trading assets, at fair value and trading liabilities, at fair value into
twocategories: cash instruments and derivative contracts, as set forth in the following table:
Trading Instruments by Category
As of December 2009 As of November 2008
Trading Trading Trading Trading
Assets, at Liabilities, at Assets, at Liabilities, at
(inmillions) Fair Value Fair Value Fair Value Fair Value
Cash trading instruments $244,124 $ 72,117 $186,231 $ 57,143
ICBC 8,111 (1) – 5,496 (1) –
SMFG 933 893 (4) 1,135 1,134 (4)
Other principal investments 13,981 (2) – 15,126 (2) –
Principal investments 23,025 893 21,757 1,134
Cash instruments 267,149 73,010 207,988 58,277
Exchange-traded 6,831 2,548 6,164 8,347
Over-the-counter 68,422 53,461 124,173 109,348
Derivative contracts 75,253 (3) 56,009 (5) 130,337 (3) 117,695
(5)
Total $342,402 $129,019 $338,325 $175,972
(1) Includes interests of $5.13billion and $3.48billion as of December2009 and November2008, respectively, held by investment funds managed by
GoldmanSachs. The fair value of our investment in the ordinary shares of ICBC, which trade on The Stock Exchange of Hong Kong, includes the effect of
foreign exchange revaluation for which we maintain an economic currency hedge.
(2) The following table sets forth the principal investments (other than our investments in ICBC and Sumitomo Mitsui Financial Group, Inc. (SMFG)) included
within the Principal Investments component of our Trading and Principal Investments segment:
As of December 2009 As of November 2008
(inmillions) Corporate Real Estate Total Corporate Real Estate Total
Private $ 9,507 $1,325 $10,832 $10,726 $2,935 $13,661
Public 3,091 58 3,149 1,436 29 1,465
Total $12,598 $1,383 $13,981 $12,162 $2,964 $15,126
(3) Net of cash received pursuant to credit support agreements of $124.60billion and $137.16billion as of December2009 and November2008, respectively.
(4) Represents an economic hedge on the shares of common stock underlying our investment in the convertible preferred stock of SMFG.
(5) Net of cash paid pursuant to credit support agreements of $14.74billion and $34.01billion as of December2009 and November2008, respectively.
Goldman Sachs 2009 Annual Report
39
Management’s Discussion and Analysis