CFTC Form 1-FR-IB Instructions - National Futures Association

STATEMENT OF THE COMPUTATION OF THE MINIMUM CAPITAL REQUIREMENTS
Line 1. - Current assets
The amount on this line should agree with the amount shown on
page 2, line 13, item 1670.
Line 2. - Total liabilities
The amount on this line should agree with the amount shown on
page 3, line 20.
Line 3. - Deductions from total liabilities
Line 3.A. - Liabilities subject to satisfactory subordination
agreements
Show on this line liabilities subordinated to the claims of
general creditors. An amount may be deducted only if: (1) the
liability is covered by a subordination agreement which meets
all of the conditions specified in regulation 1.17(h)(2); and
(2) the agreement has been reviewed and found acceptable by the
IB's DSRO or the Commission.
Line 3.B. - Certain deferred income tax liability
Enter the amount of any deferred income tax liability related to
the following:
(a) The lesser amount resulting from applying the
appropriate Federal and State income tax rates against the
unrealized gain or the applicable haircut deduction.
Example: An IB owns common stock with a current market
value of $10,000 and it has an unrealized gain of $1,000.
Assuming a 50% tax rate results in a deferred tax of $500
and a $3,000 charge against net capital (30% haircut).
Therefore, the deduction is $500, since applying the 50%
tax rate against the $1,000 unrealized gain ($500 tax) is
less than the amount that results from applying the tax
rate to the $3,000 haircut ($1,500).
(b) Any deferred tax liability related to income
accrued which is directly related to any noncurrent asset.
An example is accrued income receivable on debt securities
without a ready market.
(c) Any deferred tax liability related to unrealized
appreciation in value of any noncurrent asset. An example
is the deferred tax liability on the unrealized gain on
securities without a ready market.
Line 3.C. - Certain current income tax liability