Current Expected Credit Losses (CECL)

9 Months Ended

Sep. 30, 2020

Credit Loss [Abstract]

Current Expected Credit Losses (CECL)

26. Current Expected Credit Losses (CECL)

The CECL reserve reflects management’s current estimate of potential credit losses related to the receivable balances included in the Company’s unaudited condensed consolidated statements of financial condition. See Note 3—“Summary of Significant Accounting Policies” for further discussion of the CECL reserve methodology.

As described in Note 1—“Organization and Basis of Presentation,” upon adoption of the new CECL guidance on January 1, 2020, the Company recognized an initial CECL reserve of approximately $1.9 million, of which, $1.1 million was in “Loans, forgivable loans and other receivables from employees and partners, net,” and $0.8 million was in “Accrued commissions and other receivables, net,” against its receivables portfolio with a corresponding charge to “Retained deficit” on the Company’s unaudited condensed consolidated statements of changes in equity.

As required, any subsequent changes to the CECL reserve are recognized in “Net income (loss) available to common stockholders” in the Company’s unaudited condensed consolidated statements of operations. During the three and nine months ended September 30, 2020, the Company recorded a decrease of approximately $0.4 million and an increase of approximately $0.9 million in the CECL reserve against the receivables portfolio, respectively, bringing the Company’s total CECL reserve to approximately $2.9 million as of September 30, 2020. This total CECL reserve is comprised of $1.8 million for “Loans, forgivable loans and other receivables from employees and partners, net” and $1.1 million for “Accrued commissions and other receivables, net.” For the three and nine months ended September 30, 2020, there was a decrease of $0.7 million and an increase of $0.6 million, respectively, in the CECL reserve pertaining to “Loans, forgivable loans and other receivables from employees and partners, net” as a result of employee terminations, bringing the CECL reserve recorded pertaining to “Loans, forgivable loans and other receivables from employees and partners, net” to $1.8 million as of September 30, 2020. For each of the three and nine months ended September 30, 2020, there was an increase of $0.3 million in the CECL reserve against “Accrued commissions and other receivables, net,” which reflected the updated macroeconomic assumptions resulting from the COVID-19 pandemic, and the downward credit rating migration of certain receivables in the portfolio, bringing the CECL reserve recorded pertaining to “Accrued commissions and other receivables, net” to $1.1 million as of September 30, 2020.