Goldman Sachs : Quarterly financial report The Goldman Sachs Group, Inc.’s Quarterly Form 10-Q for the quarterly period ended on September 30, 2022.

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

• QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022

or

• TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from

to

Commission File Number: 001-14965

The Goldman Sachs Group, Inc.

(Exact name of registrant as specified in its charter)

Delaware	13-4019460
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)
200 West Street, New York, NY	10282
(Address of principal executive offices)	(Zip Code)
[phone]
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
				Trading	Exchange
				on which
Title of each class		Symbol	registered
Common stock, par value $.01 per share		GS	NYSE
Depositary Shares, Each Representing 1/1,000th Interest in a Share of Floating Rate Non-Cumulative Preferred Stock, Series A	GS PrA	NYSE
Depositary Shares, Each Representing 1/1,000th Interest in a Share of Floating Rate Non-Cumulative Preferred Stock, Series C	GS PrC	NYSE
Depositary Shares, Each Representing 1/1,000th Interest in a Share of Floating Rate Non-Cumulative Preferred Stock, Series D	GS PrD	NYSE
Depositary Shares, Each Representing 1/1,000th Interest in a Share of 5.50% Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series J	GS PrJ	NYSE
Depositary Shares, Each Representing 1/1,000th Interest in a Share of 6.375% Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series K	GS PrK	NYSE
5.793% Fixed-to-Floating Rate Normal Automatic Preferred Enhanced Capital Securities of Goldman Sachs Capital II	GS/43PE	NYSE
Floating Rate Normal Automatic Preferred Enhanced Capital Securities of Goldman Sachs Capital III		GS/43PF	NYSE
Medium-Term Notes, Series F, Callable Fixed and Floating Rate Notes due March 2031 of GS Finance Corp.		GS/31B	NYSE
Medium-Term Notes, Series F, Callable Fixed and Floating Rate Notes due May 2031 of GS Finance Corp.		GS/31X	NYSE

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☒

Accelerated filer ☐

Non-accelerated filer ☐

Smaller reporting company ☐

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

As of October 21, 2022, there were 338,634,588 shares of the registrant's common stock outstanding.

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES

QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2022

INDEX

Form 10-Q Item Number	Page No.
PART I
FINANCIAL INFORMATION	1
Item 1
Financial Statements (Unaudited)	1
Consolidated Statements of Earnings	1
Consolidated Statements of Comprehensive Income	1
Consolidated Balance Sheets	2
Consolidated Statements of Changes in Shareholders' Equity	3
Consolidated Statements of Cash Flows	4
Notes to Consolidated Financial Statements	5
Note 1. Description of Business	5
Note 2. Basis of Presentation	5
Note 3. Significant Accounting Policies	6
Note 4. Fair Value Measurements	11
Note 5. Trading Assets and Liabilities	16
Note 6. Trading Cash Instruments	17
Note 7. Derivatives and Hedging Activities	20
Note 8. Investments	30
Note 9. Loans	36
Note 10. Fair Value Option	47
Note 11. Collateralized Agreements and Financings	52
Note 12. Other Assets	56
Note 13. Deposits	59
Note 14. Unsecured Borrowings	60
Note 15. Other Liabilities	62
Note 16. Securitization Activities	63
Note 17. Variable Interest Entities	65
Note 18. Commitments, Contingencies and Guarantees	68
Note 19. Shareholders' Equity	72
Note 20. Regulation and Capital Adequacy	75
Note 21. Earnings Per Common Share	84
Note 22. Transactions with Affiliated Funds	84
Note 23. Interest Income and Interest Expense	85
Note 24. Income Taxes	85
Note 25. Business Segments	86
Note 26. Credit Concentrations	88
Note 27. Legal Proceedings	89

	Page No.
Report of Independent Registered Public Accounting Firm	102
Statistical Disclosures	103
Item 2
Management's Discussion and Analysis of Financial Condition
and Results of Operations	105
Introduction	105
Executive Overview	105
Business Environment	106
Critical Accounting Policies	107
Use of Estimates	109
Recent Accounting Developments	110
Results of Operations	110
Balance Sheet and Funding Sources	129
Capital Management and Regulatory Capital	133
Regulatory and Other Matters	137
Off-Balance Sheet Arrangements	138
Risk Management	139
Overview and Structure of Risk Management	139
Liquidity Risk Management	143
Market Risk Management	150
Credit Risk Management	154
Operational Risk Management	163
Model Risk Management	164
Other Risk Management	165
Available Information	167
Forward-Looking Statements	167
Item 3
Quantitative and Qualitative Disclosures About Market Risk	170
Item 4
Controls and Procedures	170
PART II
OTHER INFORMATION	170
Item 1
Legal Proceedings	170
Item 2
Unregistered Sales of Equity Securities and Use of Proceeds	170
Item 6
Exhibits	171
SIGNATURES	171

Goldman Sachs September 2022 Form 10-Q

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES

Consolidated Statements of Earnings (Unaudited)

		Three Months			Nine Months
		Ended September			Ended September
in millions, except per share amounts		2022		2021			2022		2021
Revenues
Investment banking	$	1,541	$	3,548	$	5,457	$	10,564
Investment management		2,276		2,139			6,733		5,840
Commissions and fees		995		860			3,079		2,766
Market making		4,642		3,929			15,561		13,096
Other principal transactions		478		1,568			338		9,759
Total non-interest revenues		9,932		12,044			31,168		42,025
Interest income		8,550		3,117			16,613		9,110
Interest expense		6,507		1,553			11,009		4,435
Net interest income		2,043		1,564			5,604		4,675
Total net revenues		11,975		13,608			36,772		46,700
Provision for credit losses		515		175			1,743		13
Operating expenses
Compensation and benefits		3,606		3,167			11,384		14,473
Transaction based		1,317		1,139			3,878		3,520
Market development		199		165			596		360
Communications and technology		459		397			1,327		1,143
Depreciation and amortization		666		509			1,728		1,527
Occupancy		255		239			765		727
Professional fees		465		433			1,392		1,137
Other expenses		737		542			2,003		1,781
Total operating expenses		7,704		6,591			23,073		24,668
Pre-tax earnings		3,756		6,842			11,956		22,019
Provision for taxes		687		1,464			2,021		4,319
Net earnings		3,069		5,378			9,935		17,700
Preferred stock dividends		107		94			356		358
Net earnings applicable to common shareholders	$	2,962	$	5,284	$	9,579	$	17,342
Earnings per common share
Basic	$	8.35	$	15.14	$	27.03	$	49.23
Diluted	$	8.25	$	14.93	$	26.71	$	48.59
Average common shares
Basic		352.8		348.3			353.0		351.8
Diluted		359.2		353.9			358.6		356.9

Consolidated Statements of Comprehensive Income (Unaudited)

		Three Months			Nine Months
		Ended September			Ended September
$ in millions		2022		2021			2022	2021
Net earnings	$	3,069	$	5,378	$	9,935	$ 17,700
Other comprehensive income/(loss) adjustments, net of tax:
Currency translation		26		(20)			(5)	(36)
Debt valuation adjustment		673		67			2,601	165
Pension and postretirement liabilities		(2)		-			10	7
Available-for-sale securities		(615)		(114)			(2,410)	(658)
Other comprehensive income/(loss)		82		(67)			196	(522)
Comprehensive income	$	3,151	$	5,311	$	10,131	$ 17,178

The accompanying notes are an integral part of these consolidated financial statements.

• Goldman Sachs September 2022 Form 10-Q

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES

Consolidated Balance Sheets (Unaudited)

		As of
	September		December
$ in millions		2022		2021
Assets
Cash and cash equivalents	$	284,251	$	261,036
Collateralized agreements:
Securities purchased under agreements to resell (at fair value)		182,502		205,703
Securities borrowed (includes $42,506 and $39,955 at fair value)		196,968		178,771
Customer and other receivables (includes $25 and $42 at fair value)		165,421		160,673
Trading assets (at fair value and includes $77,130 and $68,208 pledged as collateral)		383,975		375,916
Investments (includes $77,580 and $83,427 at fair value, and $20,375 and $12,840 pledged as collateral)		126,963		88,719
Loans (net of allowance of $4,846 and $3,573, and includes $8,250 and $10,769 at fair value)		176,669		158,562
Other assets		39,245		34,608
Total assets	$	1,555,994	$	1,463,988
Liabilities and shareholders' equity
Deposits (includes $23,587 and $35,425 at fair value)	$	394,733	$	364,227
Collateralized financings:
Securities sold under agreements to repurchase (at fair value)		159,690		165,883
Securities loaned (includes $7,444 and $9,170 at fair value)		43,822		46,505
Other secured financings (includes $14,240 and $17,074 at fair value)		15,595		18,544
Customer and other payables		278,457		251,931
Trading liabilities (at fair value)		231,713		181,424
Unsecured short-term borrowings (includes $32,470 and $29,832 at fair value)		51,850		46,955
Unsecured long-term borrowings (includes $65,358 and $52,390 at fair value)		239,965		254,092
Other liabilities (includes $462 and $359 at fair value)		20,879		24,501
Total liabilities		1,436,704		1,354,062
Commitments, contingencies and guarantees
Shareholders' equity
Preferred stock; aggregate liquidation preference of $10,703 and $10,703		10,703		10,703
Common stock; 917,804,656 and 906,430,314 shares issued, and 339,103,013 and 333,573,254 shares outstanding		9		9
Share-based awards		5,479		4,211
Nonvoting common stock; no shares issued and outstanding		-		-
Additional paid-in capital		59,031		56,396
Retained earnings		139,067		131,811
Accumulated other comprehensive loss		(1,872)		(2,068)
Stock held in treasury, at cost; 578,701,645 and 572,857,062 shares		(93,127)		(91,136)
Total shareholders' equity		119,290		109,926
Total liabilities and shareholders' equity	$	1,555,994	$	1,463,988

The accompanying notes are an integral part of these consolidated financial statements.

Goldman Sachs September 2022 Form 10-Q

2

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES

Consolidated Statements of Changes in Shareholders' Equity (Unaudited)

		Three Months			Nine Months
		Ended September			Ended September
$ in millions		2022		2021			2022		2021
Preferred stock
Beginning balance	$	10,703	$	9,203	$	10,703	$	11,203
Issued		-		750			-		1,425
Redeemed		-		-			-		(2,675)
Ending balance		10,703		9,953			10,703		9,953
Common stock
Beginning balance		9		9			9		9
Issued		-		-			-		-
Ending balance		9		9			9		9
Share-based awards
Beginning balance		5,245		3,759			4,211		3,468
Issuance and amortization of share-based awards		311		202			3,811		2,180
Delivery of common stock underlying share-based awards		(44)		(21)			(2,463)		(1,625)
Forfeiture of share-based awards		(33)		(44)			(80)		(127)
Ending balance		5,479		3,896			5,479		3,896
Additional paid-in capital
Beginning balance		58,993		56,390			56,396		55,679
Delivery of common stock underlying share-based awards		61		23			2,494		1,676
Cancellation of share-based awards in satisfaction of withholding tax requirements		(23)		(14)			(1,587)		(983)
Issuance costs of redeemed preferred stock		-		(1)			-		25
Issuance of common stock in connection with acquisition		-		-			1,730		-
Other		-		-			(2)		1
Ending balance		59,031		56,398			59,031		56,398
Retained earnings
Beginning balance		136,998		124,051			131,811		112,947
Net earnings		3,069		5,378			9,935		17,700
Accretion of redeemable noncontrolling interests		-		(4)			-		(69)
Dividends and dividend equivalents declared on common stock and share-based awards		(893)		(700)			(2,323)		(1,589)
Dividends declared on preferred stock		(107)		(94)			(356)		(317)
Preferred stock redemption premium		-		-			-		(41)
Ending balance		139,067		128,631			139,067		128,631
Accumulated other comprehensive income/(loss)
Beginning balance		(1,954)		(1,889)			(2,068)		(1,434)
Other comprehensive income/(loss)		82		(67)			196		(522)
Ending balance		(1,872)		(1,956)			(1,872)		(1,956)
Stock held in treasury, at cost
Beginning balance		(92,123)		(89,633)			(91,136)		(85,940)
Repurchased		(1,000)		(1,000)			(2,000)		(4,700)
Reissued		1		1			20		11
Other		(5)		(2)			(11)		(5)
Ending balance		(93,127)		(90,634)			(93,127)		(90,634)
Total shareholders' equity	$	119,290	$	106,297	$	119,290	$	106,297

The accompanying notes are an integral part of these consolidated financial statements.

• Goldman Sachs September 2022 Form 10-Q

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows (Unaudited)

		Nine Months
		Ended September
$ in millions		2022		2021
Cash flows from operating activities
Net earnings	$	9,935	$	17,700
Adjustments to reconcile net earnings to net cash provided by/(used for) operating activities
Depreciation and amortization		1,728		1,527
Share-based compensation		3,811		2,141
Provision for credit losses		1,743		13
Changes in operating assets and liabilities:
Customer and other receivables and payables, net		21,453		11,010
Collateralized transactions (excluding other secured financings), net		(3,872)		(88,832)
Trading assets		(39,764)		(1,815)
Trading liabilities		48,411		50,065
Loans held for sale, net		2,041		(1,780)
Other, net		(21,781)		(14,005)
Net cash provided by/(used for) operating activities		23,705		(23,976)
Cash flows from investing activities
Purchase of property, leasehold improvements and equipment		(2,994)		(3,548)
Proceeds from sales of property, leasehold improvements and equipment		1,272		3,111
Net cash used for business acquisitions		(2,113)		-
Purchase of investments		(52,989)		(31,998)
Proceeds from sales and paydowns of investments		8,080		40,127
Loans (excluding loans held for sale), net		(20,924)		(24,219)
Net cash used for investing activities		(69,668)		(16,527)
Cash flows from financing activities
Unsecured short-term borrowings, net		2,451		1,342
Other secured financings (short-term), net		(1,415)		(635)
Proceeds from issuance of other secured financings (long-term)		1,499		3,661
Repayment of other secured financings (long-term), including the current portion		(2,677)		(4,922)
Proceeds from issuance of unsecured long-term borrowings		69,620		68,798
Repayment of unsecured long-term borrowings, including the current portion		(35,328)		(38,370)
Derivative contracts with a financing element, net		1,749		477
Deposits, net		39,174		74,612
Preferred stock redemption		-		(2,675)
Common stock repurchased		(2,000)		(4,700)
Settlement of share-based awards in satisfaction of withholding tax requirements		(1,591)		(984)
Dividends and dividend equivalents paid on common stock, preferred stock and share-based awards		(2,669)		(1,903)
Proceeds from issuance of preferred stock, net of issuance costs		-		1,423
Other financing, net		365		367
Net cash provided by financing activities		69,178		96,491
Net increase in cash and cash equivalents		23,215		55,988
Cash and cash equivalents, beginning balance		261,036		155,842
Cash and cash equivalents, ending balance	$	284,251	$	211,830
Supplemental disclosures:
Cash payments for interest, net of capitalized interest	$	9,882	$	4,394
Cash payments for income taxes, net	$	3,046	$	4,769

See Notes 12 and 16 for information about non-cash activities.

The accompanying notes are an integral part of these consolidated financial statements.

Goldman Sachs September 2022 Form 10-Q

4

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

Note 1.

Description of Business

The Goldman Sachs Group, Inc. (Group Inc. or parent company), a Delaware corporation, together with its consolidated subsidiaries (collectively, the firm), is a leading global financial institution that delivers a broad range of financial services across investment banking, securities, investment management and consumer banking to a large and diversified client base that includes corporations, financial institutions, governments and individuals. Founded in 1869, the firm is headquartered in New York and maintains offices in all major financial centers around the world.

The firm reports its activities in four business segments:

Investment Banking

The firm provides a broad range of investment banking services to a diverse group of corporations, financial institutions, investment funds and governments. Services include strategic advisory assignments with respect to mergers and acquisitions, divestitures, corporate defense activities, restructurings and spin-offs, and equity and debt underwriting of public offerings and private placements. The firm also provides lending to corporate clients, including relationship lending, middle-market lending and acquisition financing. The firm also provides transaction banking services to certain corporate clients.

Global Markets

The firm facilitates client transactions and makes markets in fixed income, equity, currency and commodity products with institutional clients, such as corporations, financial institutions, investment funds and governments. The firm also makes markets in and clears institutional client transactions on major stock, options and futures exchanges worldwide and provides prime brokerage and other equities financing activities, including securities lending, margin lending and swaps. The firm also provides financing to clients through securities purchased under agreements to resell (resale agreements), and through structured credit, warehouse and asset-backed lending.

Asset Management

The firm manages assets and offers investment products (primarily through separately managed accounts and commingled vehicles, such as mutual funds and private investment funds) across all major asset classes to a diverse set of institutional clients and a network of third-party distributors around the world. The firm makes equity investments, which include alternative investing activities related to public and private equity investments in corporate, real estate and infrastructure assets, as well as investments through consolidated investment entities, substantially all of which are engaged in real estate investment activities. The firm also invests in corporate debt and provides financing for real estate and other assets.

Consumer & Wealth Management

The firm provides investing and wealth advisory solutions, including financial planning and counseling, executing brokerage transactions and managing assets for individuals in its wealth management business. The firm also provides loans, accepts deposits and provides investing services through its consumer banking digital platform, Marcus by Goldman Sachs, and through its private bank, as well as issues credit cards to consumers. The acquisition of GreenSky, Inc. (GreenSky) in March 2022 expanded the firm's offering of point-of-sale financing.

Note 2.

Basis of Presentation

These consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP) and include the accounts of Group Inc. and all other entities in which the firm has a controlling financial interest. Intercompany transactions and balances have been eliminated.

These consolidated financial statements are unaudited and should be read in conjunction with the audited consolidated financial statements included in the firm's Annual Report on Form 10-K for the year ended December 31, 2021. References to "the 2021 Form 10-K" are to the firm's Annual Report on Form 10-K for the year ended December 31, 2021. Certain disclosures included in the annual financial statements have been condensed or omitted from these financial statements as they are not required for interim financial statements under U.S. GAAP and the rules of the SEC.

These unaudited consolidated financial statements reflect all adjustments that are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented. These adjustments are of a normal, recurring nature. Interim period operating results may not be indicative of the operating results for a full year.

All references to September 2022, June 2022 and September 2021 refer to the firm's periods ended, or the dates, as the context requires, September 30, 2022, June 30, 2022 and September 30, 2021, respectively. All references to December 2021 refer to the date December 31, 2021. Any reference to a future year refers to a year ending on December 31 of that year. Certain reclassifications have been made to previously reported amounts to conform to the current presentation.

• Goldman Sachs September 2022 Form 10-Q

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

Note 3.

Significant Accounting Policies

The firm's significant accounting policies include when and how to measure the fair value of assets and liabilities, measuring the allowance for credit losses on loans and lending commitments accounted for at amortized cost, and when to consolidate an entity. See Note 4 for policies on fair value measurements, Note 9 for policies on the allowance for credit losses, and below and Note 17 for policies on consolidation accounting. All other significant accounting policies are either described below or included in the following footnotes:

Fair Value Measurements	Note 4
Trading Assets and Liabilities	Note 5
Trading Cash Instruments	Note 6
Derivatives and Hedging Activities	Note 7
Investments	Note 8
Loans	Note 9
Fair Value Option	Note 10
Collateralized Agreements and Financings	Note 11
Other Assets	Note 12
Deposits	Note 13
Unsecured Borrowings	Note 14
Other Liabilities	Note 15
Securitization Activities	Note 16
Variable Interest Entities	Note 17
Commitments, Contingencies and Guarantees	Note 18
Shareholders' Equity	Note 19
Regulation and Capital Adequacy	Note 20
Earnings Per Common Share	Note 21
Transactions with Affiliated Funds	Note 22
Interest Income and Interest Expense	Note 23
Income Taxes	Note 24
Business Segments	Note 25
Credit Concentrations	Note 26
Legal Proceedings	Note 27

Consolidation

The firm consolidates entities in which the firm has a controlling financial interest. The firm determines whether it has a controlling financial interest in an entity by first evaluating whether the entity is a voting interest entity or a variable interest entity (VIE).

Voting Interest Entities. Voting interest entities are entities in which (i) the total equity investment at risk is sufficient to enable the entity to finance its activities independently and

1. the equity holders have the power to direct the activities of the entity that most significantly impact its economic performance, the obligation to absorb the losses of the entity and the right to receive the residual returns of the entity. The usual condition for a controlling financial interest in a voting interest entity is ownership of a majority voting interest. If the firm has a controlling majority voting interest in a voting interest entity, the entity is consolidated.

Variable Interest Entities. A VIE is an entity that lacks one or more of the characteristics of a voting interest entity. The firm has a controlling financial interest in a VIE when the firm has a variable interest or interests that provide it with (i) the power to direct the activities of the VIE that most significantly impact the VIE's economic performance and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE. See Note 17 for further information about VIEs.

Equity-Method Investments. When the firm does not have a controlling financial interest in an entity but can exert significant influence over the entity's operating and financial policies, the investment is generally accounted for at fair value by electing the fair value option available under U.S. GAAP. Significant influence generally exists when the firm owns 20% to 50% of the entity's common stock or in- substance common stock.

In certain cases, the firm applies the equity method of accounting to new investments that are strategic in nature or closely related to the firm's principal business activities, when the firm has a significant degree of involvement in the cash flows or operations of the investee or when cost-benefit considerations are less significant. See Note 8 for further information about equity-method investments.

Goldman Sachs September 2022 Form 10-Q

6

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

Investment Funds. The firm has formed investment funds with third-party investors. These funds are typically organized as limited partnerships or limited liability companies for which the firm acts as general partner or manager. Generally, the firm does not hold a majority of the economic interests in these funds. These funds are usually voting interest entities and generally are not consolidated because third-party investors typically have rights to terminate the funds or to remove the firm as general partner or manager. Investments in these funds are generally measured at net asset value (NAV) and are included in investments. See Notes 8, 18 and 22 for further information about investments in funds.

Use of Estimates

Preparation of these consolidated financial statements requires management to make certain estimates and assumptions, the most important of which relate to fair value measurements, the allowance for credit losses on loans and lending commitments accounted for at amortized cost, discretionary compensation accruals, accounting for goodwill and identifiable intangible assets, provisions for losses that may arise from litigation and regulatory proceedings (including governmental investigations), and accounting for income taxes. These estimates and assumptions are based on the best available information, but actual results could be materially different.

Revenue Recognition

Financial Assets and Liabilities at Fair Value. Trading assets and liabilities and certain investments are carried at fair value either under the fair value option or in accordance with other U.S. GAAP. In addition, the firm has elected to account for certain of its loans and other financial assets and liabilities at fair value by electing the fair value option. The fair value of a financial 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. Financial assets are marked to bid prices and financial liabilities are marked to offer prices. Fair value measurements do not include transaction costs. Fair value gains or losses are generally included in market making or other principal transactions. See Note 4 for further information about fair value measurements.

Revenue from Contracts with Clients. The firm recognizes revenue earned from contracts with clients for services, such as investment banking, investment management, and execution and clearing (contracts with clients), when the performance obligations related to the underlying transaction are completed.

Revenues from contracts with clients represent approximately 45% of total non-interest revenues for the three months ended September 2022 (including approximately 90% of investment banking revenues, approximately 95% of investment management revenues and all commissions and fees) and approximately 45% of total non-interest revenues for the nine months ended September 2022 (including approximately 85% of investment banking revenues, approximately 95% of investment management revenues and all commissions and fees), and approximately 50% of total non-interest revenues for the three months ended September 2021 and approximately 40% for the nine months ended September 2021 (in each case, reflecting approximately 90% of investment banking revenues, approximately 95% of investment management revenues and all commissions and fees). See Note 25 for information about net revenues by business segment.

Investment Banking

Advisory. Fees from financial advisory assignments are recognized in revenues when the services related to the underlying transaction are completed under the terms of the assignment. Non-refundable deposits and milestone payments in connection with financial advisory assignments are recognized in revenues upon completion of the underlying transaction or when the assignment is otherwise concluded.

Expenses associated with financial advisory assignments are recognized when incurred and are included in transaction based expenses. Client reimbursements for such expenses are included in investment banking revenues.

Underwriting. Fees from underwriting assignments are recognized in revenues upon completion of the underlying transaction based on the terms of the assignment.

Expenses associated with underwriting assignments are generally deferred until the related revenue is recognized or the assignment is otherwise concluded. Such expenses are included in transaction based expenses for completed assignments.

• Goldman Sachs September 2022 Form 10-Q

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

Investment Management

The firm earns management fees and incentive fees for investment management services, which are included in investment management revenues. The firm makes payments to brokers and advisors related to the placement of the firm's investment funds (distribution fees), which are included in transaction based expenses.

Management Fees. Management fees for mutual funds are calculated as a percentage of daily net asset value and are received monthly. Management fees for hedge funds and separately managed accounts are calculated as a percentage of month-end net asset value and are generally received quarterly. Management fees for private equity funds are calculated as a percentage of monthly invested capital or committed capital and are received quarterly, semi-annually or annually, depending on the fund. Management fees are recognized over time in the period the services are provided.

Distribution fees paid by the firm are calculated based on either a percentage of the management fee, the investment fund's net asset value or the committed capital. Such fees are included in transaction based expenses.

Incentive Fees. Incentive fees are calculated as a percentage of a fund's or separately managed account's return, or excess return above a specified benchmark or other performance target. Incentive fees are generally based on investment performance over a twelve-month period or over the life of a fund. Fees that are based on performance over a twelvemonth period are subject to adjustment prior to the end of the measurement period. For fees that are based on investment performance over the life of the fund, future investment underperformance may require fees previously distributed to the firm to be returned to the fund.

Incentive fees earned from a fund or separately managed account are recognized when it is probable that a significant reversal of such fees will not occur, which is generally when such fees are no longer subject to fluctuations in the market value of investments held by the fund or separately managed account. Therefore, incentive fees recognized during the period may relate to performance obligations satisfied in previous periods.

Commissions and Fees

The firm earns commissions and fees from executing and clearing client transactions on stock, options and futures markets, as well as over-the-counter (OTC) transactions. Commissions and fees are recognized on the day the trade is executed. The firm also provides third-party research services to clients in connection with certain soft-dollar arrangements. Third-party research costs incurred by the firm in connection with such arrangements are presented net within commissions and fees.

Remaining Performance Obligations

Remaining performance obligations are services that the firm has committed to perform in the future in connection with its contracts with clients. The firm's remaining performance obligations are generally related to its financial advisory assignments and certain investment management activities. Revenues associated with remaining performance obligations relating to financial advisory assignments cannot be determined until the outcome of the transaction. For the firm's investment management activities, where fees are calculated based on the net asset value of the fund or separately managed account, future revenues associated with such remaining performance obligations cannot be determined as such fees are subject to fluctuations in the market value of investments held by the fund or separately managed account.

The firm is able to determine the future revenues associated with management fees calculated based on committed capital. As of September 2022, substantially all future net revenues associated with such remaining performance obligations will be recognized through 2029. Annual revenues associated with such performance obligations average less than $300 million through 2029.

Transfers of Financial Assets

Transfers of financial assets are accounted for as sales when the firm has relinquished control over the assets transferred. For transfers of financial assets accounted for as sales, any gains or losses are recognized in net revenues. Assets or liabilities that arise from the firm's continuing involvement with transferred financial assets are initially recognized at fair value. For transfers of financial assets that are not accounted for as sales, the assets are generally included in trading assets and the transfer is accounted for as a collateralized financing, with the related interest expense recognized over the life of the transaction. See Note 11 for further information about transfers of financial assets accounted for as collateralized financings and Note 16 for further information about transfers of financial assets accounted for as sales.

Goldman Sachs September 2022 Form 10-Q

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