FINRA Manual: Contents
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10-12 Guidance on FAS 167 for FOCUS Reporting
Referenced Rules & Notices
SEA Rule 15c3-1
SEA Rule 15c3-3
SEA Rule 17a-5
Variable Interest Entities
This Notice provides FINRA member firms with guidance from the staff of the Division of Trading and Markets of the Securities and Exchange Commission (SEC) on the procedures for reporting adjustments on the FOCUS Report resulting from the Financial Accounting Standard Board's Statement of Financial Accounting Standards No. 167 (FAS 167), Amendments to FASB Interpretation No. 46(R). The provisions of FAS 167 are effective at the start of a firm's first fiscal year beginning after November 15, 2009, or as of January 1, 2010, for firms reporting earnings on a calendar-year basis.
Questions concerning this Notice should be directed to:
Questions regarding the applicability of FAS 167 to your firm should be discussed with your independent public accountant. Questions regarding the procedures for reporting the adjustments resulting from the application of FAS 167 on the FOCUS Report may be directed to your FINRA Regulatory Coordinator.
Background and Discussion
FAS 167, among other things, established new standards for reporting transfers of assets to special-purpose entities, known as variable interest entities (VIEs) under Generally Accepted Accounting Principles (GAAP) and for consolidating VIEs. FAS 167 may require firms to consolidate assets, liabilities and equity in certain VIEs that were not previously consolidated. Rule 15c3-1 of the Securities Exchange Act of 1934 (SEA) requires that broker-dealers' FOCUS Reports be prepared in accordance with GAAP. Accordingly, firms are required to consider the impact of the FAS 167 provisions on all future FOCUS Report filings, commencing with the January 2010 FOCUS Report.
FINRA has sought guidance from the staff of the Division of Trading and Markets of the SEC as to the appropriate reporting of balances resulting from the application of FAS 167 on firms' FOCUS Reports. Based on the SEC staff's guidance, firms shall report balances resulting from the application of FAS 167 within existing line items on the FOCUS Report, in accordance with the procedures outlined below.
Firms affected by the requirements of FAS 167 shall report the balances resulting from the application of such standards on their FOCUS Report as follows:
The consolidation resulting from the application of FAS 167 does not preclude firms from the requirement to consolidate any subsidiary or affiliate for which it guarantees, pursuant to the requirements under Appendix C of SEA Rule 15c3-1.
1 FINRA's eFOCUS Filing System (eFOCUS) provides firms with the ability to use the line item "memo" feature to provide additional information about a particular balance reported on the FOCUS Report.