Broker-Dealer Annual Update: New Accounting Pronouncements and More

As another year of disruption concludes, most broker-dealers weathered the COVID-19 pandemic well. In a welcome relief from past years, 2021 saw minimal accounting and regulatory changes, and most of them simplified accounting and compliance.

Stay current with our annual broker-dealer update, which covers new accounting pronouncements, updates from regulators, and views from our auditors.

Effective Accounting Pronouncements

On December 18, 2019, the Financial Accounting Standards Board (FASB) issued an Accounting Standards Update (ASU) expected to reduce cost and complexity associated with the accounting for income taxes.

Amendments in ASU 2019-12

The update simplifies the accounting for income taxes by removing specific exceptions to the general principles in Topic 740, Income Taxes, and by clarifying and amending certain aspects of income tax-related guidance.

Effective Dates

For public business entities, including broker-dealers who file with the SEC, the amendments in this update apply to fiscal years and interim periods within those fiscal years beginning after December 15, 2020.


The impacts to most broker-dealers who prepare a tax provision will be minimal, with most of the changes relating to foreign subsidiaries, goodwill, and interim reporting.

The ASU also requires that an entity recognize a franchise tax (or similar tax) that is partially based on income as an income-based tax and account for any incremental amount as a non-income-based tax.

Regulator Updates

The SEC issued Release Number 34-91128, Order Extending the Annual Reports Filing Deadline for Certain Smaller Broker-Dealers, on February 12, 2021.

The order extends the annual-report filing deadline by 30 calendar days for smaller broker-dealers that meet certain conditions. This allows the filing of the annual report 90 days after the broker-dealers year-end, rather than 60 days.

To take advantage of this extension, the broker-dealer must submit written notification to its designated examining authority of its intent to rely on this order on an ongoing basis for as long as it meets the conditions of the order.

The broker-dealer must also file the annual reports electronically with the SEC.

You can learn more about the filing deadline extension here.

Views from the Auditors

After the successive implementations of new accounting standards from 2018 to 2020 that impacted the accounting for revenue recognition, leases, and credit losses the broker-dealer community is getting a break from the fast-paced accounting changes for the upcoming year-end.

The broker-dealer industry has had a mixed reaction to the optional extended filing from 60 to 90 days. Some broker-dealers welcome the extra time, some consider it unnecessary and maintain the 60-day filing deadline, while others take a just-in-case approach—notifying the Financial Industry Regulatory Authority (FINRA) but maintaining their traditional 60-day target.

To take advantage of the extension, the broker-dealer must file electronically—a key component of the release.

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