Goldman Sachs Finance Corp International Ltd – Financial Statements
Annual Report
Company Number: 122341
ANNUAL REPORT FOR THE FINANCIAL YEAR ENDED
INDEX
Page No. |
|
Part I |
|
Management Report |
2 |
Introduction |
2 |
Executive Overview |
2 |
Business Environment |
3 |
Principal Risks and Uncertainties |
3 |
IBOR Exposure Overview |
4 |
E.U. Regulation |
5 |
Date of Authorisation of Issue |
5 |
Page No. |
||
Part II |
||
Directors' Report and Audited Financial Statements |
6 |
|
Directors' Report |
6 |
|
Independent Auditors' Report |
8 |
|
Income Statement |
13 |
|
Statement of Comprehensive Income |
13 |
|
Balance Sheet |
14 |
|
Statement of Changes in Equity |
15 |
|
Statement of Cash Flows |
15 |
|
Notes to the Financial Statements |
16 |
|
Note 1. |
General Information |
16 |
Note 2. |
Basis of Preparation |
16 |
Note 3. |
Summary of Significant Accounting Policies |
16 |
Note 4. |
Critical Accounting Estimates and Judgements |
20 |
Note 5. |
Net Revenues |
20 |
Note 6. |
Operating Expenses |
21 |
Note 7. |
Compensation and Benefits |
21 |
Note 8. |
Income Tax Expense |
21 |
Note 9. |
Customer and Other Receivables |
21 |
Note 10. Derivative Assets and Liabilities |
21 |
|
Note 11. |
Intercompany Loans |
21 |
Note 12. |
Customer and Other Payables |
22 |
Note 13. |
Unsecured Borrowings |
22 |
Note 14. |
Share Capital |
23 |
Note 15. |
Statement of Cash Flows Reconciliations |
23 |
Note 16. |
Financial Commitments and Contingencies |
23 |
Note 17. |
Maturity of Assets and Liabilities |
23 |
Note 18. |
Related Party Disclosures |
24 |
Note 19. |
Financial Instruments |
25 |
Note 20. |
Fair Value Measurement |
27 |
Note 21. |
Financial Risk Management and Capital Management |
31 |
1
Management Report
Introduction
The company's ultimate parent undertaking and controlling entity is
References to "the financial statements" are to the directors' report and audited financial statements as presented in Part II of this annual report. All references to
Executive Overview
Income Statement
The income statement is set out on page 13 of this annual report. Net revenues, which include the net profit or loss from the company's issuance, hedging and lending activity, were a gain of
Other Comprehensive Income
The statement of comprehensive income is set out on page 13 of this annual report. The company's other comprehensive income, which relates to the company's debt valuation adjustment (DVA), was a gain of
Balance Sheet
The balance sheet is set out on page 14 of this annual report. As of
Future Outlook
The directors consider that the year-end financial position of the company was satisfactory and no significant change in the company's principal business activities is currently expected.
2
Management Report
Business Environment
In 2022, the global economy was impacted by persistent broad macroeconomic and geopolitical concerns, including
The economic outlook remains uncertain, reflecting concerns about the continuation or escalation of the war between
Principal Risks and Uncertainties
The company faces a variety of risks that are substantial and inherent in its business.
The principal risks and uncertainties that the company faces are: market risk, liquidity risk, credit risk, operational risk, legal and regulatory risk and market development. For further information about the risk factors that impact
Economic and Market Conditions
The company is primarily involved in the issuance of debt securities in a number of markets and the proceeds from these debt securities are lent to affiliates. The company also enters into derivative transactions with affiliates for hedging purposes. The activity of the company and its annual issuance volume is affected both by positive and negative developments in the markets where it carries out its business activity. A difficult general economic situation may lead to a lower issuance volume. The market of these debt securities depends particularly on the development of capital markets, which are in tuaffected by the general situation of the world economy, as well as the economic and political conditions in the respective countries.
Commercial Activity
The company was established only for the purpose of issuing debt securities, lending these proceeds to affiliates and entering into derivative transactions with affiliates for hedging purposes, and does not carry out any other operating business activities.
The company is an indirect, wholly-owned subsidiary of
Liquidity
The credit ratings of
The company's liquidity could be impaired by an inability to access unsecured debt markets, an inability to access funds from
Credit Markets
Widening credit spreads for
Reliance on
The company is a wholly-owned subsidiary of
Furthermore, the company relies upon certain
3
Management Report
As a consequence of the foregoing, in the event the company's relationships with other
Changes in Underliers
Many of the products that the company issues, such as structured notes or warrants pay interest or determine the principal amount to be paid at maturity or in the event of default by reference to rates or by reference to an index, currency, basket, exchange traded fund (ETF) or other financial metric (the underlier). In the event that the composition of the underlier is significantly changed, by reference to rules governing such underlier or otherwise, the underlier ceases to exist (for example, in the event that a country withdraws from the Euro or links its currency to or delinks its currency from another currency or benchmark, an index or ETF sponsor materially alters the composition of an index or ETF, or stocks in a basket are delisted or become impermissible to be included in the index or ETF), the underlier ceases to be recognised as an acceptable market benchmark or there are legal or regulatory constraints on linking a financial instrument to the underlier, the company may experience adverse effects consistent with those described below for Interbank Offered Rates (IBORs).
IBOR Exposure Overview
Replacement of Interbank Offered Rates, including London Interbank Offered Rate (LIBOR)
On
The language in the company's contracts and financial instruments that define IBORs, in particular LIBOR, have developed over time and have various events that trigger when a successor rate to the designated rate would be selected. Once a trigger is satisfied, contracts and financial instruments often give the calculation agent (which may be the company) discretion over the successor rate or benchmark to be selected. As a result, for the most commonly used USD LIBOR settings, there continues to be considerable uncertainty as to how the financial services industry will address the discontinuance of designated rates in contracts and financial instruments or such designated rates ceasing to be acceptable reference rates. This uncertainty could ultimately result in disputes and litigation surrounding the proper interpretation of the company's IBOR- based contracts and financial instruments.
Further, the discontinuation of an IBOR, changes in an IBOR or changes in market acceptance of any IBOR as a reference rate may also adversely affect the amounts paid on debt securities the company has issued, amounts received and paid on derivative instruments the company has entered into, the value of such debt securities or derivative instruments, the trading market for debt securities, the company's ability to effectively use derivative instruments to manage risk and its exposure to fluctuations in interest rates.
4
Management Report
IBOR Exposure (Audited).
USD LIBOR.
The table below presents the company's exposure to interest rate benchmarks subject to reform.
Debt securities |
Derivative notional |
|||
$ in millions |
issued |
amount |
||
As of |
||||
USD LIBOR |
$ |
3,464 |
$ |
68,903 |
Other |
269 |
182 |
||
Total |
$ |
3,733 |
$ |
69,085 |
As of |
||||
USD LIBOR |
$ |
3,958 |
$ |
35,994 |
Other |
339 |
- |
||
Total |
$ |
4,297 |
$ |
35,994 |
In the table above:
- Non-USDIBOR derivative notionals excludes amounts for which fallbacks apply from
January 1, 2022 , or amounts for which all future cashflows have already been fixed, as the company has no ongoing IBOR exposure related to these transactions. - USD-LIBORbased debt securities issued of
$3.46 billion included approximately$3.33 billion of debt securities issued which will mature afterJune 2023 based on their contractual terms. - USD-LIBORbased derivative contracts with notionals of
$68.90 billion included approximately$64.08 billion of derivative contracts which will mature afterJune 2023 based on their contractual terms. All such derivative contracts are with aGS Group affiliate under bilateral agreements subject to the IBOR Protocol. - In relation to outstanding debt securities linked to IBORs, the company expects to follow the fallback methodology described in the offering documentation and, as the documentation permits, follow global industry standard replacements. Notification of the applicable fallbacks has been made available to holders of these securities.
E.U. Regulation
The company lists debt instruments on certain E.U. trading venues and as a result the E.U. Transparency Directive and Delegated Regulation 2019/815 on European Single Electronic Format (ESEF Regulation) apply to the company.
Date of Authorisation of Issue
The management report was authorised for issue by the Board of Directors on
By order of the board
Director
5
Directors' Report
The directors present their report and the audited financial statements for the year ended
Dividends
The directors do not recommend the payment of an ordinary dividend for the year ended
Disclosure of Information to Auditors
In the case of each of the persons who are directors of the company at the date when this report was approved:
- So far as each of the directors is aware, there is no relevant audit information of which the company's auditors are unaware; and
- Each of the directors has taken all the steps that they ought to have taken as a director to make themselves aware of any relevant audit information and to establish that the company's auditors are aware of that information.
Independent Auditors
Statement of Directors' Responsibilities in Respect of the Financial Statements
The directors are responsible for preparing the management report, the directors' report and the financial statements in accordance with applicable law and regulations.
Companies (Jersey) Law 1991 requires the directors to prepare financial statements for each financial year. Under that law the directors have prepared the financial statements in accordance with International Financial Reporting Standards (IFRS) as adopted in the E.U.
Under company law, directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period. In preparing the financial statements, the directors are required to:
- Select suitable accounting policies and then apply them consistently;
- State whether applicable IFRS as adopted in the E.U. have been followed, subject to any material departures disclosed and explained in the financial statements;
- Make judgements and estimates that are reasonable and prudent; and
- Prepare the financial statements on the going concebasis unless it is inappropriate to presume that the company will continue in business.
The directors confirm that they have complied with the above requirements in preparing the financial statements.
The directors are responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The directors are also responsible for keeping adequate accounting records which disclose with reasonable accuracy at any time the financial position of the company and to enable them to ensure that the financial statements comply with the Companies (Jersey) Law 1991.
The directors are responsible for:
- The maintenance and integrity of the company's financial statements on the
Goldman Sachs website. Legislation in Jersey governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. - Presenting the financial statements in compliance with the requirements set out in the Delegated Regulation 2019/815 on European Single Electronic Format (ESEF Regulation).
6
Directors' Report
Directors' Confirmations
The directors confirm to the best of their knowledge:
- The financial statements, prepared in accordance with Companies (Jersey) Law 1991 and IFRS as adopted in the E.U., give a true and fair view of the assets, liabilities, financial position and profit or loss of the company; and
- The management report includes a fair review of the development and performance of the business and the position of the company, together with a description of the principal risks and uncertainties that the company faces.
Directors
The directors of the company who served throughout the year and to the date of this report, except where noted, were:
A. Bajpayi
A. D'Souza (resigned
No director had, at the year end, any interest requiring note herein.
Date of Authorisation of Issue
The financial statements were authorised for issue by the Board of Directors on
By order of the board
Director
7
Independent auditors' report to the member of
Report on the audit of the financial statements
Opinion
In our opinion,
- give a true and fair view of the state of the company's affairs as at
31 December 2022 and of its profit and cash flows for the year then ended; - have been properly prepared in accordance with International Financial Reporting Standards as adopted in the
European Union ; and - have been prepared in accordance with the requirements of the Companies (Jersey) Law 1991
We have audited the financial statements, included within the Annual Report, which comprise: the balance sheet as at
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (
Independence
We remained independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the
Our audit approach
Overview
Audit scope.
- We perform a full scope audit of the financial statements of the company as a whole as a single component. The scope of the audit and the nature, timing and extent of audit procedures were determined by our risk assessment, the financial significance of financial statement line items and qualitative factors (including history of misstatement through fraud or error). In particular, we looked at where the directors made subjective judgements, for example in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain.
Key audit matters.
- Valuation of debt securities issued designated at fair value through profit and loss and the associated derivatives recorded at fair value.
Materiality.
- Overall materiality:
$347.2 million (2021:$166.0 million ) based on 1% of total assets. - Performance materiality:
$260.4 million (2021:$124.5 million ).
The scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements.
Key audit matters
Key audit matters are those matters that, in the auditors' professional judgement, were of most significance in the audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by the auditors, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These matters, and any comments we make on the results of our procedures thereon, were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
This is not a complete list of all risks identified by our audit. The key audit matter below is consistent with last year.
8
Independent auditors' report to the member of
Key audit matter |
How our audit addressed the key audit matter |
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Valuation of debt securities issued designated at fair |
We understood and evaluated the design and tested the |
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value through profit and loss and the associated |
operational effectiveness of key controls over the valuation of |
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derivatives recorded at fair value. |
financial assets and liabilities. |
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In accordance with the accounting policies set out in Note 3 |
These controls included: |
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'Summary of Significant Accounting Policies' of the financial |
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ā¢ Validation of new and existing models by a specialist team |
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statements, |
the |
directors |
designate |
a |
portfolio |
of |
the |
|||||
within the risk function, as well as access and change |
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company's issued debt securities at fair value through profit |
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management controls in respect of models in use. |
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and loss (FVTPL). These securities are recorded in the |
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ā¢ The price verification process performed by the Product |
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balance sheet at fair value. A debt valuation adjustment |
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(DVA) is recorded through other comprehensive income and |
Control Controller function using prices and model valuation |
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the remaining changes in the fair value are recorded in net |
inputs sourced from third parties; and |
|||||||||||
revenues. |
ā¢ Calculation and approval of key valuation adjustments |
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As set out in Note 20 'Fair Value Measurement', the company |
We noted no significant exceptions in the design or operating |
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effectiveness of these controls and we determined we could rely |
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economically |
hedges |
the |
debt |
securities |
issued |
with |
||||||
on these controls for the purposes of our audit. |
||||||||||||
derivatives. Derivative assets are mandatorily at fair value; |
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derivative liabilities are classified as held for trading. Both are |
In addition, we performed substantive testing as described |
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recorded in the balance sheet at fair value with changes in the |
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below: |
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fair value recorded in net revenues. |
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ā¢ Together with our internal valuation specialists, we revalued |
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As the debt securities issued are economically hedged with |
a sample of financial instruments using independent models |
|||||||||||
derivatives, the net impact of changes in fair values of the |
and, to the extent available, independently sourced inputs. |
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debt securities and derivatives in total is not material to the |
ā¢ We tested a sample of external inputs used within |
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company's profit or loss, or other comprehensive income. |
management's price verification process as at 31 December |
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This key audit matter relates to the balance sheet valuation of |
2022 and evaluated the appropriateness of the third party data |
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debt securities issued designated at FVTPL, and the |
sources used by management. |
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associated derivative hedges recorded at fair value. |
ā¢ For a sample of debt securities issued, we confirmed that |
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The valuation |
of debt |
securities |
issued |
and |
designated at |
these were economically hedged by derivative assets or |
||||||
liabilities and that the residual risk within the company was |
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FVTPL and derivative assets and liabilities held at fair value |
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limited. Given the increase in the DVA adjustment for the |
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is produced |
by |
financial models |
using a |
variety of |
inputs. |
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year, in addition to revaluing a sample of the structured notes, |
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Estimation |
uncertainty |
can |
be high |
for |
those instruments |
|||||||
we also tested the split of that valuation for certain positions |
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where material |
inputs |
are unobservable, |
including |
the |
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between the market component of the trade and the impact |
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company's own credit curves used as an input into the DVA |
model. |
arising from DVA, and recalculated the amounts being |
recorded for the year which had been recognised in OCI. |
|
As at
- We examined cash reconciliations, large gains and losses on disposals and other events which could provide evidence about the appropriateness of management's valuation.
Based on the work performed, we found management's estimates of the fair value of debt securities issued and derivative instruments to be supported by the evidence obtained.
In addition.
- We performed testing to validate that management had allocated financial instruments to the appropriate level within the fair value hierarchy in line with the established policy, and that the policy classifications were appropriate.
- We read and assessed the disclosures in Note 20 'Fair Value Measurement' regarding significant unobservable inputs and the fair value hierarchy and found them to be appropriate.
9
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