PBK (2/14)
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Index [WPRef]
PBK-CX-13.2: Additional Disclosures for Noncarrying Broker-dealers
Entity: [Client Name]
Prepared by: [ ]
Financial Statement Date: 10/29/2014
Date: [ ]
Explanation
The following is a checklist of supplemental disclosure requirements that are unique to noncarrying broker-dealers.
The checklist should be completed in addition to the commercial entity “Disclosure Requirements for Financial
Statements of Nonpublic Companies” at PBK-CX-13.1 . The disclosures included in this checklist have been
summarized from FASB ASC 940, Financial Services—Brokers and Dealers (link) , and the AICPA Audit and
Accounting Guide (AICPA Guide), Brokers and Dealers in Securities (2013), updated by the AICPA as of July 1,
2013. Some of the disclosures included in this checklist originate solely from the AICPA Guide. Accordingly, such
disclosures are not authoritative because they are not included in the FASB Codification. However, the authors
believe many firms will continue to provide those disclosures even though the exclusion from the FASB ASC
indicates the disclosures are no longer required by GAAP. While the authors would generally label such
disclosures as accepted practice, those disclosures retain specific reference to the paragraphs in the AICPA
Guide where they are discussed to provide users a source for the disclosure.
Note that this is a disclosure checklist, not a checklist for applying GAAP; therefore, measurement and certain
financial statement presentation questions are not addressed. In addition, certain disclosures applicable for only
carrying broker-dealers are excluded.
This checklist is current through the Accounting Standards Update No. 2014-07 (March 2014).
Instructions: A block  has been provided for certain major disclosure captions. If the major caption does not
apply to your client, simply place a () in the . It will then not be necessary to check N/A for each question
under the major caption. Otherwise, respond to each question with a () in the appropriate column: (1) Yes—
disclosure made, (2) No—item present, but no disclosure made (any item checked “No” should be explained in
the checklist or in a separate memorandum), or (3) N/A—either the item is not present or it is immaterial to the
financial statements.
Note: Certain disclosures required for broker-dealers may not be applicable to introducing broker-dealers. Such
disclosures are included in this checklist; simply mark the steps N/A.
Disclosure Made?
Yes
No
N/A
GENERAL
1. Do the financial statements include the appropriate facing page and the oath or
affirmation form on Form X-17A-5? (SEC Rule 17a-5; AICPA Guide 4.114 )
2. If the broker-dealer requests confidential treatment of other than the statement of
financial condition, were the public and nonpublic portions filed separately and in
the format required? (AICPA Guide 3.138 )
STATEMENT OF FINANCIAL CONDITION
CASH
1. Are the following separately classified in the statement of financial condition or
disclosed in the notes: [FASB ASC 210-10-45-4(a) ; AICPA Guide 4.26 ]
a. Cash in banks subject to withdrawal restrictions?
b. Restricted deposits held as compensating balances?
PBK-CX-13.2
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Disclosure Made?
Yes
No
N/A
c.
Cash segregated in compliance with federal or other regulations?
SECURITIES
1. Are securities sold, not yet purchased properly classified and reported in the
statement of financial condition? (FASB ASC 940-320-32-2 , 940-320-35-1 and
2 , and 940-320-45-2 ; AICPA Guide 4.48–.53 )
2. Are proprietary securities entered into for trading or investment purposes included
in
securities
owned;
and
securities
sold,
not
yet
purchased?
(FASB ASC 940-320-45-2 )
3. Is the broker-dealer’s share (that is not merely contingent) in underwriting or joint
accounts with other broker-dealers for issued securities included with its trading
accounts? (FASB ASC 940-20-45-2 )
4. With respect to securities under agreements to repurchase or resell:
(FASB ASC 860 ; AICPA Guide 4.45–.46 )
a. Are the securities presented gross, except when a right of offset exists and
the conditions described in FASB ASC 210-20-45-11 have been met?
(FASB ASC 942-210-45-3 )
b. Is collateral policy properly disclosed? (FASB ASC 860 )
MEMBERSHIPS
1. Are the following types of memberships in exchange recognized as an asset:
(FASB ASC 940-340-05-1 and 940-340-25-2 ; AICPA Guide 4.27–.28 )
a. Memberships held under an appropriate agreement (that is, an ABC
agreement)?
b. Memberships contributed for the broker-dealer to use under a subordination
agreement?
BANK LOANS
1. Is there disclosure of the general attributes of bank loans, including the collateral
pledged? (FASB ASC 860-30-25 and 860-30-50 ; AICPA Guide 4.54–.55 )
REDEEMABLE FORMS OF EQUITY
1. Are any “redeemable” forms of equity separately classified in the financial
statements as a liability (rather than as equity) and disclosed in the notes?
(FASB ASC 480-10-45 and 480-10-50 ; AICPA Guide 4.14 )
STATEMENT OF SHAREHOLDERS’ (OR MEMBERS’) EQUITY
1. Does the statement of financial condition appropriately separate subordinated
liabilities and ownership equity? (Generally accepted)
2. Does the statement of changes in liabilities subordinated to claims of general
creditors present the increases and decreases to subordinated liabilities for each
year being reported on, even if no increases or decreases in subordinated
liabilities occur during the year? (SEC Rule 17a-5; AICPA Guide 4.15 )
3. Is there disclosure of the amount net capital and its required net capital, computed
in accordance with SEC Rule 15c3-1 or other requirements? (SEC Rule 17a-5;
AICPA Guide 4.20 )
STATEMENT OF CHANGES IN FINANCIAL CONDITION
PBK-CX-13.2
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Disclosure Made?
Yes
No
N/A
1. Are trading securities activities presented in the “Operating” section of the
statement of cash flows? (FASB ASC 940-320-45-7 ; AICPA Guide 4.12 )
INCOME STATEMENT
1. Does the statement of income or operations separately disclose revenues and
expenses by the following major types: (AICPA Guide 4.10 and 4.63 )
a. Commission income? (FASB ASC 940-20-05-3
AICPA Guide 4.64 )
and 940-20-25-2 ;
b. Interest and dividend income and expense? (AICPA Guide 4.66–.68 )
c.
Principal transactions?
d. Underwriting income
AICPA Guide 4.70 )
and
expense?
(FASB
ASC
940-605-25
;
e. Management and investment advisory income? (AICPA Guide 4.71 )
f.
Exchange fees? (AICPA Guide 4.73 )
g. Occupancy?
h. Employee compensation and benefits?
i.
Communication and data processing?
2. With respect to fixed-income securities purchased at a discount or premium, has
consideration been given to: (FASB ASC 940-320-45-4 ; AICPA Guide 4.50 )
a. Presenting accreted interest as interest?
b. Presenting income and the changes in valuations as trading gains and
losses?
3. Has the rebate or interest expense on repurchase transactions that are accounted
for as financing transactions been reflected separately from any trading gains or
losses? (FASB ASC 940-405-45-1 ; AICPA Guide 7.122 )
4. Are the gross components of any income and expense from complex trading
strategies (such as matched-stock borrow and loan transactions, matched-book
trading strategies, box spreads, conversions, and reversals) presented net in the
income statement been disclosed on the face of the financial statements or in the
notes? (FASB ASC 940-320-05-3 , 940-320-45-6 , 940-320-50-1 ;
AICPA Guide 7.123 )
5. Has any income or loss allocable to “redeemable” forms of equity been reflected
separately as interest cost in the income statement or disclosed in the notes?
(FASB ASC 480-10 ; AICPA Guide 4.14 )
6. Are realized and unrealized trading gains and losses (principal transactions)
presented net? (FASB ASC 940-320-05-3 , 940-320-35-3 , and 940-320-45-5 ;
AICPA Guide 4.69 )
NOTES TO FINANCIAL STATEMENTS
COMMITMENTS AND CONTINGENCIES
1. Are the following matters properly presented and disclosed in the financial
statements: (AICPA Guide 4.57 )
a. Contractual commitments in underwriting and when-issued contracts?
(FASB ASC 940-20-50-1 )
PBK-CX-13.2
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Disclosure Made?
Yes
No
N/A
b. Contingencies?
c.
Indemnifications and guarantees? (AICPA Guide 4.57 )
d. Subordinated borrowings? (AICPA Guide 4.58 )
e. Underwriting?
CONSOLIDATED ENTITIES
1. If the statement of financial condition on Part II or Part IIA of the FOCUS Report is
not consolidated, is a summary of financial data (including assets, liabilities, and
net worth) for subsidiaries not consolidated in the Part II or Part IIA filing included
in the notes to the financial statements? [SEC Rule 17a-5(d)(2);
AICPA Guide 4.16–.17 ]
2. If the statement of financial condition on Part II or Part IIA is prepared on a
different consolidated basis, such as a “one-line” (equity) basis, are any
differences, if material, disclosed in a note to the financial statements or included
in supplementary information? [SEC Rule 17a-5(d)(2); AICPA Guide 4.16 ]
3. If any subsidiaries are consolidated under the flow-through capital benefits of
Appendix C of SEC Rule 15c3-1, have summary financial statements of such
subsidiaries, when material, and the effect of the consolidation on net capital and
required
net
capital
been
disclosed?
[SEC
Rule
17a-5(c)(2)(ii);
AICPA Guide 4.17 ]
SUPPLEMENTARY SCHEDULES
1. Do supplementary schedules include a computation of net capital under SEC Rule
15c3-1 in accordance with the requirements and format of Part II or Part IIA of the
FOCUS Report (Form X-17A-5)? (SEC Rule 17a-5; AICPA Guide 4.18 )
2. With respect to the computation of net capital under SEC Rule 15c3-1 in the audit
report with the broker-dealer’s corresponding, unaudited, and most recent FOCUS
Report filed: (SEC Rule 17a-5; AICPA Guide 4.19–4.21 )
a. Do the supplementary schedules
appropriate explanations, of any
computations?
present a reconciliation, including
material differences between the
b. If there are no material differences, was a statement filed indicating that fact?
PBK-CX-13.2
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