Accounting Guide

Chapter 5 Accounting Standards

5.01 Accounting principles generally accepted in the United States of America (U.S. GAAP) apply to broker-dealers in the same manner as they apply to other industries; however, certain activities of broker-dealers' operations are unique. It is the purpose of this chapter to identify and discuss the accounting treatment for certain of those unique activities that are engaged in by broker-dealers. New broker-dealer activities may develop that will require accounting guidance to reflect their economic substance. The accounting principles that apply to the specific activities addressed in this chapter can be applied to other activities that are similar to those discussed. Broker-dealers also prepare regulatory reports and supplemental information, in addition to financial statements. Accounting and reporting requirements under GAAP may differ from broker-dealer regulatory accounting and reporting requirements stipulated by the SEC and other regulatory organizations. (See chapter 3, “Regulatory Considerations,” of this guide.) In addition, the financial reporting practices and recording of transactions discussed in this chapter may differ significantly from the tax basis of reporting.

Accounting Model

5.02 A broker-dealer accounts for inventory and derivative positions (such as futures, forwards, swaps, and options) at fair value. Most other assets, such as fixed assets, accounts receivable, securities borrowed, securities purchased under agreements ...