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Goldman Sachs 2009 Annual Report
93
Notes to Consolidated Financial Statements
and assumptions relate to fair value measurements, the
accounting for goodwill and identi able intangible assets
and the provision for potential losses that may arise from
litigation and regulatory proceedings and tax audits.
Although these and other estimates and assumptions are
based on the best available information, actual results could
be materially different from these estimates.
Revenue Recognition
Investment Banking. Underwriting revenues and fees from
mergers and acquisitions and other  nancial advisory
assignments are recognized in the consolidated statements
of earnings when the services related to the underlying
transaction are completed under the terms of the engagement.
Expenses associated with such transactions are deferred
until the related revenue is recognized or the engagement is
otherwise concluded. Underwriting revenues are presented
net of related expenses. Expenses associated with  nancial
advisory transactions are recorded as non-compensation
expenses, net of client reimbursements.
Trading Assets and Trading Liabilities. Substantially all trading
assets and trading liabilities are re ected in the consolidated
statements of nancial condition at fair value. Related gains
or losses are generally recognized in “Trading and principal
investments” in the consolidated statements of earnings.
Other Financial Assets and Financial Liabilities at Fair Value.
In addition to trading assets, at fair value and trading
liabilities, at fair value, the  rm has elected to account for
certain of its other  nancial assets and  nancial liabilities
at fair value under ASC815-15 and 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 the  rm’s 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 the  rm’s matched book and
certain  rm nancing activities;
▪ certain deposits issued by the  rm’s bank subsidiaries,
as well as securities held by GoldmanSachs Bank USA
(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
shareforwards;
▪
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 the
rm has signi cant in uence over the investee and would
otherwise apply the equity method of accounting.
Fair Value Measurements. 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.
The fair value hierarchy under ASC820 prioritizes the
inputs to valuation techniques used to measure fair value.
The hierarchy gives the highest priority to unadjusted quoted
prices in active markets for identical assets or liabilities