2021 Brokers and Dealers in Securities - Accounting Guide

How should brokers and dealers in securities implement the new credit loss standard, FASB ASC 326, Credit Losses? The 2021 edition of the guide addresses that question by offering a high-level discussion of the following:

• Financial assets measured at amortized cost basis that are eligible for the collateral maintenance provision practical expedient.
• Financial assets measured at amortized cost basis that are not eligible for the collateral maintenance provision practical expedient.
• Certain off-balance sheet credit exposures.

This edition of the guide also addresses the scope and application of FASB ASC 842, Leases to common broker-dealer obligations, including identification of no-action information concerning the treatment of operating leases under Rule 15c3-1 related to computation of net capital. An example disclosure note is also included.

In addition, this guide offers a new example disclosure note for credit losses, which has been added to the guide's illustrative financial statements and footnote disclosures. This edition also contains revenue recognition implementation issues for brokers and dealers in securities applying FASB ASC 606 and related interpretations from the FASB/IASB Joint Transition Resource Group for Revenue Recognition (TRG). Specifically, the following revenue streams are addressed:

• Commission income
• Recognition on Trade Date
• Underwriting revenues
• Soft dollars
• Investment banking M&A advisory fees
• Selling and distribution fee revenue

The following other related topics are also addressed:

• Scope
• Costs associated with investment banking advisory services
• Principal versus agent: Costs associated with underwriting

Other updates to this edition are to conform the content to current accounting standards and regulatory requirements.