Summary Of Significant Accounting Policies

9 Months Ended

Sep. 30, 2011

Summary Of Significant Accounting Policies

Summary Of Significant Accounting Policies

Note 1. Summary of Significant Accounting Policies

Nature of Operations

SEI Investments Company (the Company), a Pennsylvania corporation, provides investment processing, fund processing, and investment management business outsourcing solutions to corporations, financial institutions, financial advisors, and ultra-high-net-worth families in the United States, Canada, the United Kingdom, continental Europe, and other various locations throughout the world. Investment processing solutions utilize the Company's proprietary software systems to track investment activities in multiple types of investment accounts, including personal trust, corporate trust, institutional trust, and non-trust investment accounts, thereby allowing banks and trust companies to outsource trust and investment related activities. Revenues from investment processing solutions are recognized in Information processing and software servicing fees on the accompanying Consolidated Statements of Operations, except for fees earned associated with trade execution services.

The fund processing solution offers a full range of administration and distribution support services to mutual funds, collective trust funds, single-manager hedge funds, funds of hedge funds, private equity funds and other types of investment funds. Administrative services include fund accounting, trustee and custodial support, legal support, transfer agency and shareholder servicing. Distribution support services range from market and industry insight and analysis to identifying distribution opportunities. Revenues from fund processing solutions are recognized in Asset management, administration and distribution fees on the accompanying Consolidated Statements of Operations.

Investment management programs consist of mutual funds, alternative investments and separate accounts. These include a series of money market, equity, fixed-income and alternative investment portfolios, primarily in the form of registered investment companies. The Company serves as the administrator and investment advisor for many of these products. Revenues from investment management programs are recognized in Asset management, administration and distribution fees on the accompanying Consolidated Statements of Operations.

Basis of Presentation

The accompanying Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America. Certain financial information and accompanying note disclosure normally included in the Company's Annual Report on Form 10-K has been condensed or omitted. The interim financial information is unaudited but reflects all adjustments (consisting of only normal recurring adjustments) which are, in the opinion of management, necessary for a fair statement of financial position of the Company as of September 30, 2011, the results of operations for the three and nine months ended September 30, 2011 and 2010, and cash flows for the nine month periods ended September 30, 2011 and 2010. These interim Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and the Notes to the Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2010.

There have been no significant changes in significant accounting policies during the nine months ended September 30, 2011 as compared to the significant accounting policies described in the Company's Annual Report on Form 10-K for the year ended December 31, 2010.

Cash and Cash Equivalents

Cash and cash equivalents includes $283,461 and $383,946 at September 30, 2011 and December 31, 2010, respectively, primarily invested in SEI-sponsored open-ended money market mutual funds.

Restricted Cash

Restricted cash includes $3,000 at September 30, 2011 and December 31, 2010 segregated for regulatory purposes related to trade-execution services conducted by SEI Investments (Europe) Limited. Restricted cash also includes $1,000 at September 30, 2011 and December 31, 2010 segregated in special reserve accounts for the benefit of customers of the Company's broker-dealer subsidiary, SEI Investments Distribution Co. (SIDCO), in accordance with certain rules established by the Securities and Exchange Commission for broker-dealers.

Capitalized Software

The Company capitalized $30,556 and $28,097 of software development costs during the nine months ended September 30, 2011 and 2010, respectively. As of September 30, 2011, capitalized software placed into service included on the accompanying Consolidated Balance Sheet had a weighted average remaining life of approximately 10.7 years. Amortization expense related to capitalized software was $19,299 and $17,149 during the nine months ended September 30, 2011 and 2010, respectively.

Software development costs capitalized during the nine months ended September 30, 2011 and 2010 relates to the continued development of the Global Wealth Platform (GWP). As of September 30, 2011, the net book value of GWP was $289,683 (net of accumulated amortization of $81,025), including $14,895 of capitalized software development costs in-progress associated with future releases. GWP has an estimated useful life of 15 years and a weighted average remaining life of 10.8 years. Amortization expense for GWP was $18,873 and $16,724 during the nine months ended September 30, 2011 and 2010, respectively.

Earnings Per Share

The calculations of basic and diluted earnings per share for the three months ended September 30, 2011 and 2010 are:

		(Denominator)		(Denominator)		(Denominator)
	For the Three Months Ended September 30, 2011
	Income (Numerator)		Shares (Denominator)		Per Share Amount
Basic earnings per common share	$	49,232		181,718	$	.27

Dilutive effect of stock options		0		862

Diluted earnings per common share	$	49,232		182,580	$	.27

	For the Three Months Ended September 30, 2010
	Income (Numerator)		Shares (Denominator)		Per Share Amount
Basic earnings per common share	$	56,389		187,964	$	.30

Dilutive effect of stock options		0		1,557

Diluted earnings per common share	$	56,389		189,521	$	.30

Employee stock options to purchase 16,290,000 and 9,810,000 shares of common stock, with an average exercise price of $23.66 and $25.53, were outstanding during the three months ended September 30, 2011 and 2010, respectively, but not included in the computation of diluted earnings per common share because the effect on diluted earnings per common share would have been anti-dilutive.

The calculations of basic and diluted earnings per share for the nine months ended September 30, 2011 and 2010 are:

		(Denominator)		(Denominator)		(Denominator)
	For the Nine Months Ended September 30, 2011
	Income (Numerator)		Shares (Denominator)		Per Share Amount
Basic earnings per common share	$	160,563		184,030	$	.87

Dilutive effect of stock options		0		2,002

Diluted earnings per common share	$	160,563		186,032	$	.86

	For the Nine Months Ended September 30, 2010
	Income (Numerator)		Shares (Denominator)		Per Share Amount
Basic earnings per common share	$	169,287		189,090	$	.90

Dilutive effect of stock options		0		1,604

Diluted earnings per common share	$	169,287		190,694	$	.89

Employee stock options to purchase 13,273,000 and 16,096,000 shares of common stock, with an average exercise price of $24.72 and $23.47, were outstanding during the nine months ended September 30, 2011 and 2010, respectively, but not included in the computation of diluted earnings per common share because the effect on diluted earnings per common share would have been anti-dilutive.

New Accounting Pronouncements

In May 2011, the Financial Accounting Standards Board (FASB) issued a final Accounting Standards Update which represents the converged guidance of the FASB and the International Accounting Standards Board on fair value measurement. The guidance clarifies how a principal market is determined, addresses the fair value measurement of instruments with offsetting market or counterparty credit risks, addresses the concept of valuation premise and highest and best use, extends the prohibition on blockage factors to all three levels of the fair value hierarchy and requires additional disclosures. The guidance is effective for interim and annual periods beginning after December 15, 2011 and is applied prospectively. The Company is currently evaluating the requirements of the guidance and has not yet determined its impact on the Company's consolidated financial statements.

In June 2011, the FASB issued a final Accounting Standards Update to amend the presentation of comprehensive income in financial statements. This new guidance allows companies the option to present other comprehensive income in either a single continuous statement or in two separate but consecutive statements. Under both alternatives, companies will be required to present each component of net income and comprehensive income. The guidance is effective for interim and annual periods beginning after December 15, 2011 and is applied retrospectively. The Company does not expect the adoption of the guidance to have any impact on its consolidated financial statements.

Statements of Cash Flows

For purposes of the Consolidated Statements of Cash Flows, the Company considers investment instruments purchased with an original maturity of three months or less to be cash equivalents.

The following table provides the details of the adjustments to reconcile net income to net cash provided by operating activities for the nine months ended September 30:


	2011			2010
Net income	$	161,797		$	170,418
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		16,348			16,392
Amortization		20,031			17,895
Equity in earnings of unconsolidated affiliate		(82,387	)		(72,839	)
Distributions received from unconsolidated affiliate		78,550			46,266
Stock-based compensation		10,966			16,403
Provision for losses on receivables		(98	)		(646	)
Deferred income tax expense		(1,834	)		5,046
Net realized gains from investments		(3,912	)		(30,435	)
Change in other long-term liabilities		5,527			110
Other		(4,484	)		1,440
Change in current asset and liabilities
Decrease (increase) in
Receivables from regulated investment companies		1,789			1,045
Receivables		(8,703	)		(22,217	)
Other current assets		(1,276	)		(3,567	)
Increase (decrease) in
Accounts payable		2,322			2,378
Accrued liabilities		(18,601	)		(26,049	)
Deferred revenue		(499	)		(795	)

Total adjustments		13,739			(49,573	)
Net cash provided by operating activities	$	175,536		$	120,845

Reclassifications

Certain prior year amounts have been reclassified to conform to current year presentation.