INTL FCStone 2005 Annual Report Download - page 50

INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES
Notes to the Consolidated Financial Statements—(Continued)
September 30, 2005 and 2004
The Company has made an investment in a hedge fund sponsored by INTL Consilium. This investment is
valued at fiscal year-end at the net asset value provided by the fund’s administrator as of the date of valuation.
(f) Revenue Recognition
The revenues of the Company are derived from realized and unrealized trading income in securities,
derivative instruments, commodities and foreign currencies purchased or sold for the Company’s account.
Realized and unrealized trading income (net dealer inventory and investment gains) are recorded on a trade date
basis. Commissions and related clearing expenses are recorded on a trade-date basis as securities transactions
occur. Securities owned and securities sold, not yet purchased are stated at fair value with related changes in
unrealized appreciation or depreciation reflected in net dealer inventory and investment gains. Interest income is
recorded on the accrual basis and dividend income is recognized on the ex-dividend date.
(g) Depreciation and Amortization
Depreciation of property and equipment is calculated using the straight-line method over the estimated
useful lives of the assets, which range from three to seven years. Leasehold improvements are amortized using
the straight-line method over the shorter of the term of the lease or the estimated period of benefit to be received
from the assets, which range from three to seven years.
(h) Income Taxes
The Company files consolidated Federal income tax returns. The Company files consolidated state income
tax returns in those states in which the Company meets the consolidation requirements and files separately in
those states in which consolidation is not applicable.
The Company complies with Statement of Financial Accounting Standards (SFAS) No. 109, Accounting for
Income Taxes, which requires an asset and liability approach to financial reporting for income taxes. Deferred tax
assets and liabilities are recognized for the future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled. The effect of a change in tax rates on
deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.
Valuation allowances are established when necessary to reduce deferred tax assets to an amount that, in the
opinion of management, is more likely than not to be realized.
(i) Stock-Based Employee Compensation
In October 1995, the Financial Accounting Standards Board (FASB) issued SFAS No. 123, Accounting for
Stock-Based Compensation, which generally permits entities to recognize as expense over the vesting period the
fair value of all stock-based awards calculated on the date of grant. Alternatively, SFAS No. 123 allows entities
to continue to apply the provisions of Accounting Principles Board (APB) Opinion No. 25, which provides that
compensation expense is recorded on the date of grant only if the current market price of the underlying stock
exceeds the exercise price and pro forma disclosures as if the fair-value-based method defined in SFAS No. 123
had been applied. The Company has elected to continue to apply the provisions of APB Opinion No. 25 and
provide the pro forma disclosure provisions of SFAS No. 123.
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