The Securities Industry and Financial Markets Association (SIFMA) hosted its Financial Management Society (FMS) Regional Conference from May 28 to 29, 2025 in Chicago. Forvis Mazars was honored to sponsor the event and be present as industry professionals discussed current accounting and regulatory matters.
We have included selected summaries from various conference speakers, though not all discussions from the two-day event are captured. This article is intended to highlight trending topics in accounting and financial statement reporting as well as recurring themes. The sections below are our interpretation of the speakers’ comments and do not necessarily represent the opinions of Forvis Mazars.
Accounting
Members of the American Institute of CPAs (AICPA) Stockbrokerage and Investment Banking Expert Panel provided updates on accounting, regulatory, and auditing hot topics that are being discussed across the securities industry.
New Accounting Standards
On November 4, 2024, FASB issued Accounting Standards Update (ASU) 2024-03: Disaggregation of Income Statement Expenses (DISE). This standard update is applicable to all public business entities effective for fiscal years beginning after December 15, 2026. This update requires further disaggregation of expense line items within the financial statement footnotes. The standard focuses on five categories of expenses that will be required to be disclosed in tabular format:
- Purchases of Inventory
- Employee Compensation
- Depreciation
- Amortization
- Depreciation, Depletion, and Amortization Related to Oil and Gas Activities
FASB is providing the detail offered by these captions to give investors better insight into the cash flows and performance from primary operations in place of the entity.
For a broker-dealer (BD), it is expected that one-time, unusual expenditures and credit losses will also need to be considered for disclosure where these items are not categorically similar to the line items prescribed in the standard. Current guidance requires that expenses incurred related to cost sharing and reimbursements received require gross presentation within the financial statements; the footnote disclosures should also be presented gross. At this time, FASB chose not to provide direct guidance on materiality, leaving this relative and subjective with consideration of existing guidance related to materiality, such as that provided in SEC Staff Accounting Bulletin No. 99, Materiality.
Relevant to DISE only, FASB has considered providing an exception for all BDs that do not file financial statements with the SEC’s Division of Corporation Finance and would not be eligible for a scope exception.
On December 14, 2023, FASB issued an update (ASU 2023-09, Income Taxes [Topic 740]) to enhance transparency and business decision-making capabilities by way of additional disclosures surrounding effective tax rates and taxes paid.
The standards update is effective for public business entities for annual periods beginning after December 31, 2024 and for other entities for annual periods beginning after December 31, 2025. Early adoption is permitted.
Two key aspects of this update are: 1) enhanced rate reconciliation disclosures and 2) income taxes paid disclosures.
Enhanced Rate Reconciliation Disclosure
Companies will be required to provide additional disclosures related to rate reconciliation—in a tabular format—for eight specified categories. Those categories are as follows:
- State and local income tax, net of federal (national) income tax effect
- Foreign tax effects
- Effect of changes in tax laws or rates enacted in the current period
- Effect of cross-border tax laws
- Tax credits
- Changes in valuation allowances
- Nontaxable or nondeductible items
- Changes in unrecognized tax benefits
Companies also will be required to provide additional explanations surrounding reconciling items that exceed a quantitative threshold. This quantitative threshold is met if the tax-effected impact of the reconciling item (gross multiplied by applicable statutory income tax rate) is equal to or greater than 5% of pretax net income (PTNI).
Income Taxes Paid Disclosure
Companies are going to be required to include additional disclosures related to income taxes paid (net of refunds received) and jurisdictions that make up more than 5% of total income taxes paid in the current fiscal year.
Other Disclosures
Disclosures will be required surrounding pretax income disaggregated to show domestic and foreign components. Further, disclosures will be disaggregated by federal, state, and foreign components.
FASB is working on example disclosures to provide companies with additional guidance. The update is also currently under review by the Financial Reporting Executive Committee (FinREC).
FASB Projects
FASB has issued an invitation to comment on the definition of public business entity (PBE). A potential modification to the PBE definition is significant to the BD industry as current guidance includes non-issuer BDs in the PBE definition. This requires BDs to apply new accounting standards under the effective date and scope structure applicable to public companies. The matter has been on the radar of FASB for several years and resurfaced in the discussions related to the DISE rules.
FASB has requested comments on the definitions of PBE and various definitions within the codification. It recognizes the importance of industry perspective for ongoing projects. The AICPA Stockbrokerage and Investment Banking Expert Panel is contributing to a comment letter through FINREC, and SIFMA also intends to submit comments. The deadline for comments is June 30, 2025.
The panel provided an update on the invitation to comment on financial key performance indicators (KPIs) for business entities. The project considers non-GAAP measures/KPIs being incorporated into GAAP financial statements and requested feedback from respondents on which KPIs should be considered and their placement within the statements. The comment period closed on April 30, 2025, with respondents noting that KPIs are a potentially useful tool for users. However, definitions of KPIs would need standardization. Further, significant effort would be needed to provide KPIs that are relevant to stakeholders for all industries. Several respondents suggested that FASB’s time may be better allocated to creating transparency and clarity for existing disclosures. Respondents referenced existing SEC non-GAAP disclosures under Regulation S-K as an existing source for KPIs. SIFMA provided a comment letter related to this project.
PCAOB Projects
The new confirmation standard will replace Auditing Standard (AS) 2310, The Confirmation Process. This new standard is intended to improve the quality of audits where confirmation is used by the auditor and to support the use of electronic confirmations and third-party intermediaries in the confirmation process.
The new standard and related amendments are effective for audits of fiscal years ending on or after June 15, 2025. The key changes are summarized below:
- Specific required areas for performance or consideration of confirmation procedures
- Adds a new requirement to confirm cash and cash equivalents held by third parties, or otherwise obtain relevant and reliable audit evidence by directly accessing information maintained by a knowledgeable external source;
- Carries forward the existing requirement to confirm accounts receivable, and if determined not feasible, requires the auditor to perform other substantive procedures, including tests of details, involving evidence obtained indirectly from external sources;
- Similar to the previous standard, the new standard carries forward a requirement to consider confirming complex or significant, unusual transactions, with clarification that this requirement applies to complex or significant unusual transactions associated with significant risks;
- Emphasizes the auditor’s responsibility to maintain control over the confirmation process and responsibility for selecting the items to be confirmed, sending confirmation requests, and receiving confirmation responses, i.e., internal audit may not be used to perform these functions;
- Adds new procedures related to the use of intermediaries, e.g., confirmation.com;
- States that negative confirmation requests alone do not provide sufficient appropriate audit evidence;
- Clarifies the auditor’s responsibility to evaluate the reliability of evidence received from confirmations;
- Provides examples of alternative procedures; and
- Requires audit committee communication when confirmation procedures were not used for cash or accounts receivable and the account was determined to be significant.
BD audits are expected to be impacted in areas where testing of fails is performed, and customer accounts receivable is material.
Regulatory
SEC Rule 15c3-3, Customer Protection
On December 20, 2024, the SEC approved a final rule that would require certain BDs to move from a weekly 15c3-3 reserve computation to a daily reserve computation. Any BDs that exceed $500 million credits combined for customer and proprietary accounts of BDs may be required to complete a daily reserve computation. Beyond the requirement for daily reporting, there will also be the following changes:
- BDs performing daily reserve computations (whether required or voluntary) can reduce the aggregate debit items in their reserve formula by 2% instead of the previous 3% for those using the alternative method under SEC Rule 15c3-1 (Net Capital Rule).
- Require BDs to be compliant by December 31, 2025.
While there has been no formal communication from the SEC, there are currently a few items that are being considered regarding the 15c3-3 computation:
- Compliance Date: There is a chance that the compliance date could be extended by six months (most likely issued through a commission action). This is due to concerns around “funds or cash in motion.” Funds in motion refers to cash transfers that have not been settled in an account, such as customer sweep accounts. This could cause BDs to use their own funds in the 15c3-3 account, which could be punitive given the large volume of these transactions. If the SEC elects to provide relief, it is expected to be in the form of a no-action letter.
- Holiday Schedule: A proposed holiday schedule submitted by SIFMA is expected to be approved by the SEC through a no-action letter. This will offer BDs relief around various holidays and align bank and federal holidays.
The rule change results in firms needing to assess their current systems, procedures, and controls to determine if the existing process and procedures are fit for moving to a daily 15c3-3 reserve calculation.
BDs should consider analyzing the 15c3-3 calculation process, identifying and redesigning tasks to create efficiencies, and implementing spreadsheet and/or third-party software enhancements to comply with the SEC rule.
The broker-dealer team at Forvis Mazars provides advisory and assurance services to BDs of varying sizes and complexities. Let our skilled professionals assist you with resources to help achieve your organization’s needs. Contact us today.