Goldman Sachs 2009 Annual Report Download - page 47

Other Financial Assets and Financial Liabilities at Fair Value.
In addition to trading assets, at fair value and trading
liabilities, at fair value, we have elected to account for certain
of our other  nancial assets and  nancial liabilities at fair
value under ASC815-15 and ASC 825-10 (i.e.,the fair value
option). The primary reasons for electing the fair value
option are to re ect economic events in earnings on a timely
basis, to mitigate volatility in earnings from using different
measurement attributes and to address simpli cation and cost-
bene t considerations.
Such  nancial assets and  nancial liabilities accounted for at
fair value include:
▪
certain unsecured short-term borrowings, consisting of all
promissory notes and commercial paper and certain hybrid
 nancial instruments;
▪
certain other secured  nancings, primarily transfers
accounted for as  nancings rather than sales, debt raised
through our William Street credit extension program and
certain other nonrecourse  nancings;
▪
certain unsecured long-term borrowings, including prepaid
physical commodity transactions and certain hybrid
 nancial instruments;
▪
resale and repurchase agreements;
▪
securities borrowed and loaned within Trading and Principal
Investments, consisting of our matched book and certain
 rm  nancing activities;
▪
certain deposits issued by our bank subsidiaries, as well as
securities held by GSBank USA;
▪
certain receivables from customers and counterparties,
including certain margin loans, transfers accounted for as
secured loans rather than purchases and prepaid variable
share forwards;
▪
certain insurance and reinsurance contracts and certain
guarantees; and
▪
in general, investments acquired after November 24, 2006,
when the fair value option became available, where we have
signi cant in uence over the investee and would otherwise
apply the equity method of accounting. In certain cases,
we apply the equity method of accounting to new investments
that are strategic in nature or closely related to our principal
business activities, where we have a signi cant degree of
involvement in the cash  ows or operations of the investee,
or where cost-bene t considerations are less signi cant.
Goodwill and Identi able Intangible Assets
As a result of our acquisitions, principally SLK LLC (SLK)
in 2000, The Ayco Company, L.P. (Ayco) in 2003 and our
variable annuity and life insurance business in 2006, we have
acquired goodwill and identi able intangible assets. Goodwill
is the cost of acquired companies in excess of the fair value
of net assets, including identi able intangible assets, at the
acquisition date.
Goodwill. We test the goodwill in each of our operating
segments, which are components one level below our three
business segments, for impairment at least annually, by
comparing the estimated fair value of each operating segment
with its estimated net book value. We derive the fair value of
each of our operating segments based on valuation techniques
we believe market participants would use for each segment
(observable average price-to-earnings multiples of our
competitors in these businesses and price-to-book multiples).
We derive the net book value of our operating segments by
estimating the amount of shareholders’ equity required to
support the activities of each operating segment. Our last
annual impairment test wasperformed during our 2009
fourth quarter and no impairment was identi ed.
During 2008 (particularly during the fourth quarter) and early
2009, the  nancial services industry and the securities markets
generally were materially and adversely affected by signi cant
declines in the values of nearly all asset classes and by a serious
lack of liquidity. If there was a prolongedperiod of weakness
in the business environment and  nancial markets, our
businesses would be adversely affected, which could result in
an impairment of goodwill in the future.
Goldman Sachs 2009 Annual Report
45
Management’s Discussion and Analysis