Item 6. SELECTED FINANCIAL DATA

The tables below present selected historical consolidated financial and other data of the Company for the periods indicated.

(1)The results for 2017 include the impact of the Tax Cuts and Job Act (“Tax Act”) which was enacted on December 22, 2017. The Tax Act resulted in additional income tax expense of $62 million for the one-time transition tax on deemed repatriation of earnings of some of our foreign subsidiaries and $115 million from the remeasurement of the Company’s deferred tax assets at the reduced corporate income tax rate of 21%. Other income includes a $93 million gain from the remeasurement of Tax Receivable Agreement liability, payable to Holdings, which is associated with and offsetting to the expense on remeasurement of deferred tax assets. See Note 4 – “Equity and Earnings per Share” and Note 11 – “Income Taxes” to the audited consolidated financial statements, in Part II, Item 8 of this Annual Report on Form 10-K.

(2)The results for 2019 include an unusual loss of $42 million recorded as customer bad debt which reflects losses recognized on margin lending to a small number of our brokerage customers that had taken relatively large positions in a security listed on a major U.S. exchange, which lost a substantial amount of its value in a very short timeframe. See Note 14 – “Commitments, Contingencies and Guarantees” to the audited consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K for additional details.

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The results for 2015 include an unusual loss of $137 million recorded as customer bad debt. On January 15, 2015, in an unprecedented action, the Swiss National Bank removed a previously instituted and repeatedly confirmed cap of the currency relative to the euro, causing a sudden move in the value of the Swiss franc. Several of our customers holding currency futures and spot positions suffered losses in excess of their deposits with us. We took immediate action to hedge our exposure to the foreign currency receivables from these customers. As of December 31, 2019, we have incurred cumulative losses, net of hedging activity and debt collection efforts, of $115 million. We continue to actively pursue collection of the debts. The ultimate effect of this incident on our results will depend upon the outcome of our debt collection efforts.

(1)Cash, cash equivalents and short-term investments represent cash and cash equivalents, cash and securities segregated under federal and other regulations, short-term investments and securities purchased under agreements to resell.

(2)As of December 31, 2019, approximately $71.1 billion, or 99.2%, of total assets were considered liquid and consisted primarily of cash, marketable securities and collateralized receivables.

(3)As a result of the Company’s acquisition from Holdings of IBG LLC membership interests, the Company received not only an interest in IBG LLC but also, for federal income tax purposes, a step-up to the federal income tax basis of the assets of IBG LLC underlying such additional interest. This increased tax basis is expected to result in tax benefits as a result of increased amortization deductions. The Company will retain 15% of the tax benefits actually realized. As set forth in the Tax Receivable Agreement the Company entered into with Holdings, the Company will pay the remaining 85% of the realized tax benefits relating to any applicable tax year to Holdings. The deferred tax asset was $116 million, $140 million, $146 million, $273 million, and $288 million and the corresponding payable to Holdings was $139 million, $171 million, $187 million, $285 million, and $291 million as of December 31, 2019, 2018, 2017, 2016, and 2015, respectively. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of this Annual Report on Form 10-K for additional details related to the impact of the Tax Act on the Company.

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