# ASC 320-940-25: Investments—Debt Securities — Financial Services—Brokers and Dealers — 25 Recognition

Source: FASB Accounting Standards Codification, Basic View

[Read online](https://asc.understandingaccounting.org/asc/320/940/#25-recognition)

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## ASC 320-940-25: 25 Recognition

[Read section](https://asc.understandingaccounting.org/asc/320/940/#25-recognition)

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### Proprietary Trading Securities

##### [320-940-25-1](https://asc.understandingaccounting.org/asc/320/940/#320-940-25-1)

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The statement of financial condition shall reflect all [regular-way trades](https://asc.understandingaccounting.org/glossary/r/#regular-way-trades "Regular-way trades include both of the following: All transactions in exchange-traded financial instruments that are expected to settle within the standard settlement cycle of that exchange (for example, three days for U.S. exchanges) All transactions in cash-market-traded financial instruments that are expected to settle within the time frame prevalent or traditional for each specific instrument (for example, for U.S. government securities, one or two days).") on an accrual or trade-date basis. Risk, benefits, and economic potentials are created and conveyed at the trade date (that is, the inception of the contract), which is when the major terms have been agreed to by the parties. To properly reflect the economic effects of purchase and sale transactions for financial instruments (that is, to reflect the assumption of the risks and rewards resulting from changes in the value of financial instruments), broker-dealers shall account for the changes in value relating to all proprietary or principal transactions on a trade-date basis.

##### [320-940-25-2](https://asc.understandingaccounting.org/asc/320/940/#320-940-25-2)

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For example, if the broker-dealer purchased financial instruments for its own account on the date of the statement of financial condition, the transaction shall be reflected in the broker-dealer's inventory with a corresponding credit to net receivable or payable for unsettled regular-way trades. If the exchange does not occur on the contracted settlement date (referred to as a [fail-to-deliver](https://asc.understandingaccounting.org/glossary/f/#fail-to-deliver "A fail-to-deliver is a securities sale to another broker-dealer that has not been delivered to the buying broker-dealer by the close of business on the settlement date.") or [fail-to-receive](https://asc.understandingaccounting.org/glossary/f/#fail-to-receive "A fail-to-receive is a securities purchase from another broker-dealer not received from the selling broker-dealer by the close of business on the settlement date.")), these transactions shall be recognized on the statement of financial condition as fails-to-receive or fails-to-deliver.