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C. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended
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Dec. 31, 2014
C - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
[1] | Cash Equivalents:
| Cash equivalents consist of highly liquid investments purchased with an original maturity of 3 months or less. Cash equivalents are carried at fair value and amount to $6,179,000 and $14,839,000 at December 31, 2014 and 2013, respectively, consisting of money market funds.
| Cash equivalents – restricted of $1,532,000 at December 31, 2014 and 2013 representing cash invested in a money market fund which serves as collateral for a secured demand note payable in the amount of $1,200,000 to SBS (see Note J).
[2] | Securities:
| Securities owned are carried at fair value with realized and unrealized gains and losses reflected in trading profits. Siebert clears all its security transactions through unaffiliated clearing firms on a fully disclosed basis. Accordingly, Siebert does not hold funds or securities for, or owe funds or securities to, its customers. Those functions are performed by the clearing firms.
[3] | Fair value of financial instruments:
| Authoritative accounting guidance defines fair value, establishes a framework for measuring fair value and establishes a fair value hierarchy. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between participants at the measurement date. Fair value measurements are not adjusted for transaction costs. The fair value hierarchy prioritizes inputs to valuation techniques used to measure fair value into three levels:
| Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities.
| Level 2 – Inputs other than quoted market prices that are observable, either directly or indirectly, and reasonably available.
| Level 3 – Unobservable inputs which reflect the assumptions that management develops based on available information about the assumptions market participants would use in valuing the asset or liability.
| The classification of financial instruments valued at fair value as of December 31, 2014 is as follows:
|  | 2014 |  | 2013 |
Financial Instrument |  | Level 1 |  | Level 1 |
Cash equivalents |  | $ | 7,711,000 |  | $ | 16,371,000 |
Securities |  |  | 488,000 |  |  | 406,000 |
|  | $ | 8,199,000 |  | $ | 16,777,000 |
| Securities consist of common stock, which is valued on the last business day of the year at the last available reported sales price on the primary securities exchange.
[4] | Income Taxes:
| The Company accounts for income taxes utilizing the asset and liability approach requiring the recognition of deferred tax assets and liabilities for the expected future tax consequences of net operating loss carryforwards and temporary differences between the basis of assets and liabilities for financial reporting purposes and tax purposes.
[5] | Furniture, Equipment and Leasehold Improvements:
| Furniture, equipment and leasehold improvements are stated at cost, net of accumulated depreciation and amortization. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets, generally five years. Leasehold improvements are amortized over the shorter of the estimated useful life of the improvements or period of the lease.
[6] | Advertising Costs:
| Advertising costs are charged to expense as incurred.
[7] | Use of Estimates:
| The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
[8] | Per Share Data:
| Basic earnings (loss) per share is calculated by dividing net income (loss) by the weighted average outstanding common shares during the year. Diluted earnings per share is calculated by dividing net income by the number of shares outstanding under the basic calculation and adding all dilutive securities, which consist of options. As the Company incurred a net loss for each of the years ended December 31, 2014, 2013 and 2012, basic and diluted net loss per common share are the same for each year as the effect of stock options is anti-dilutive. In 2014, 2013 and 2012, 265,000, 350,000 and 400,000 common shares, respectively, issuable upon the exercise of options were not included in the computation.
[9] | Revenue:
| Commission revenues and related clearing expenses are recorded on a trade-date basis. Fees, consisting principally of revenue participation with the Company’s clearing broker in distribution fees, and interest are recorded as earned.
| Investment banking revenue includes gains and fees, net of syndicate expenses, arising from underwriting syndicates in which the Company participates. Investment banking management fees are recorded on the offering date, sales concessions on the settlement date and underwriting fees at the time the underwriting is completed and the income is reasonably determinable.
| Trading gains and losses are also recorded on a trade-date basis and principally represent riskless principal transactions which the Company, after receiving an order, buys or sells securities as principal and at the same time sells or buys the securities with a markup or markdown to satisfy the order.
| Interest is recorded on an accrual basis and dividends are recorded on the ex-dividend date.
[10] | Stock-Based Compensation:
| Share-based payments to employees, including grants of employee stock options, are recognized in the statement of operations as an operating expense, based on their fair values on the grant date. Share-based compensation costs are recognized on a straight-line basis over the requisite service periods of awards which would normally be the vesting period of the options.
[11] | Intangibles:
| Purchased intangibles which have finite useful lives are principally being amortized using the straight-line method over estimated useful lives of three to five years. Domain names and other intellectual property which are deemed to have an indefinite useful life are not amortized but are tested for impairment annually or more frequently if events or changes in circumstances indicate that the asset might be impaired. The impairment test for indefinite-lived intangibles consists of a comparison of their fair value with their carrying amount (see note F).
[12] | Valuation of Long-Lived Assets:
| The Company evaluates the recoverability of its long-lived assets including amortizable intangibles and recognizes an impairment loss in the event the carrying value of these assets exceeds the estimated future undiscounted cash flows attributable to these assets. The Company assesses potential impairment to its long-lived assets when events or changes in circumstances indicate that its carrying value may not be recoverable. Should impairment exist, the impairment loss would be measured based on the excess of the carrying value of the assets over their fair value.
Siebert, Brandford, Shank Financial LLC and Subsidiary |
C - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
[1] | Principles of Consolidation:
| Commencing on November 4, 2014, the accompanying financial statements include the accounts of SBSF and its wholly-owned subsidiary SBS after elimination of intercompany balances and transactions. Prior thereto, the financial statements represent those of SBS. The creation of SBSF and related transfer thereto of the members’ interest in SBS did not result in any change in the carrying value of the existing assets or liabilities of SBS in the consolidated financial statements as both entities were under common control.
[2] | Revenues:
| Investment banking revenues include gains and fees, net of syndicate expenses, arising primarily from municipal bond offerings in which the Company acts as an underwriter or agent. Investment banking management fees are recorded on the offering date, sales concessions on the settlement date, and underwriting fees at the time the underwriting is completed and the income is reasonably determinable
| Security transactions are recorded on a trade-date basis. Securities owned are valued at fair value. The resulting realized and unrealized gains and losses are reflected as trading profits.
| Commission revenue which relates to the capital market business are recorded on a trade date basis.
| Dividends are recorded on the ex-dividend date, and interest income is recognized on an accrual basis.
[3] | Fair value:
| See Note C(3) for financial instruments measured at fair value.
| Authoritative accounting guidance defines fair value, establishes a framework for measuring fair value and establishes a fair value hierarchy. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements are not adjusted for transaction costs. The fair value hierarchy prioritizes inputs to valuation techniques used to measure fair value into three levels:
| Level 1 | Unadjusted quoted prices in active markets for identical assets or liabilities.
| Level 2 | Inputs other than quoted market prices that are observable, either directly or indirectly, and reasonably available.
| Level 3 | Unobservable inputs which reflect the assumptions that the managing members develop based on available information about the assumptions market participants would use in valuing the asset or liability.
[4] | Cash equivalents:
| Cash equivalents represent short-term, highly liquid investments which are readily convertible to cash and have maturities of three months or less at time of purchase. Cash equivalents, which are valued at fair value, consist of money market funds which amounted to $15,965,885 and $19,787,407 at December 31, 2014 and 2013, respectively (Level 1). The Company maintains its assets with financial institutions which may at times exceed federally insured limits. In the event of financial institutions insolvency, recovery of the assets may be limited.
[5] | Furniture, equipment and leasehold improvements, net:
| Furniture, equipment and leasehold improvements are stated at cost, net of accumulated depreciation and amortization. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets, generally five years. Leasehold improvements are amortized over the period of the lease.
[6] | Intangible Assets
| Issuer relationships, which were recorded in connection with the acquisition of the capital markets business (see Note B), are being amortized by the straight-line method over 2.9 years.
| Intangible assets with finite lives are tested for recoverability whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. The Company assesses the recoverability of its intangible assets by determining whether the unamortized balance can be recovered over the assets’ remaining useful life through undiscounted estimated future cash flows. If undiscounted estimated future cash flows indicate that the unamortized amounts will not be recovered, an adjustment will be made to reduce such amounts to fair value based on estimated future cash flows discounted at a rate commensurate with the risk associated with achieving such cash flows.
[7] | Goodwill
| Goodwill, which was recorded in connection with the acquisition of the capital markets business (see Note B), is not subject to amortization and is tested for impairment annually, or more frequently if events or changes in circumstances indicate that the asset may be impaired. The impairment test consists of a comparison of the fair value of the reporting unit with the carrying amount its net assets, including goodwill. Fair value is typically based upon estimated future cash flows discounted at a rate commensurate with the risk involved or market-based comparables. If the carrying amount of the Company’s net assets exceeds the fair value of the reporting unit, then an analysis will be performed to compare the implied fair value of goodwill with the carrying amount of goodwill. An impairment loss will be recognized in an amount equal to the excess of the carrying amount over its implied fair value.
[8] | Use of estimates:
| The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
[9] | Income taxes:
| The Company is not subject to federal income taxes. Instead, the members are required to include in their income tax returns their respective share of the Company’s income or loss. The Company is subject to tax in certain state and local jurisdictions. Deferred taxes are not significant.

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