4 Significant Accounting Policies
Basis
of consolidation and form of presentation
The accompanying consolidated financial statements include the accounts
of the Company and its wholly-owned subsidiaries. All significant intercompany
transactions and balances have been eliminated.
Cash
equivalents
Cash equivalents represent money market accounts, which are payable
on demand, or short-term investments with an original maturity of less
than 30 days. The carrying amount of such cash equivalents approximates
their fair value due to the short-term nature of these instruments.
Investments
Investments on the Consolidated Statement of Financial Condition comprise
ownership interests of less than 20% in non-publicly traded companies
which are accounted for under the equity method or the cost basis of accounting.
Trading
activities
Securities owned and securities sold, not yet purchased, which primarily
consist of listed and OTC stocks, are carried at market value and are
recorded on a trade date basis. Net trading revenue (trading gains, net
of trading losses) and commissions and related expenses, including compensation
and benefits, execution and clearance fees and payments for order flow,
are also recorded on a trade date basis. Payments for order flow represent
payments to other broker-dealers for directing their order executions
to the Company. The Company records interest income net of transaction-related
interest charged by clearing brokers for facilitating the settlement and
financing of securities sold, not yet purchased and interest on subordinated
notes and short-term debt. Interest expense incurred during 1999 amounted
to approximately $3.7 million.
Mandatorily
redeemable preferred units
The Preferred A and Preferred B Units were mandatorily redeemable and
the distributions on such units have been classified as interest expense
in the Consolidated Statements of Income.
Depreciation,
amortization and occupancy
Fixed assets are being depreciated on a straight-line basis over their
estimated useful lives of three to seven years. Leasehold improvements
are being amortized on a straight-line basis over the life of the related
office lease. The Company records rent expense on a straight-line basis
over the life of the lease.
Income
taxes
Income tax expense in the Consolidated Statements of Income represents
income taxes incurred from July 13, 1998, the date of the Reorganization,
through December 31, 1998 and for the year ended December 31, 1999. Before
the Reorganization, Roundtable was a limited liability company and was
not subject to federal or state income taxes. Subsequent to the Reorganization,
the Company is subject to federal income taxes and state income taxes
in New York, New Jersey and other states.
The Company records deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the accruing amounts and tax bases of assets and liabilities using enacted tax rates.
Estimated
fair value of financial instruments
The Company's securities owned and securities sold, not yet purchased
are carried at market value. Management estimates that the fair values
of other financial instruments recognized on the Consolidated Statements
of Financial Condition (including receivables, payables, accrued expenses,
subordinated debt and mandatorily redeemable preferred units) approximate
their carrying values, as such financial instruments are short-term in
nature, bear interest at current market rates or are subject to frequent
repricing.
Other
The preparation of financial statements in conformity with generally accepted
accounting principles 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.
Certain prior year amounts have been reclassified to conform to the current year presentation.
