INTL FCStone 2011 Annual Report Download - page 113

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INTL FCSTONE INC.Form10K 99
PART II
ITEM 8 Consolidated Financial Statements and Supplementary Data
e Company recognizes the tax benefi t from an uncertain tax
position only if it is more likely than not that the tax position will
be sustained on examination by the taxing authority, based upon
the technical merits of the position. e tax benefi t recognized in
the fi nancial statements from such a position is measured based on
the largest benefi t that has a greater than 50% likelihood of being
realized upon ultimate settlement. A reconciliation of the beginning
and ending amount of unrecognized tax benefi ts is as follows:
(in millions)
Year Ended September30,
2011 2010 2009
Balance, beginning of year $ — $ — $ —
Gross increases for tax positions related to current year — — —
Gross increases for tax positions related to prior years 0.9 — —
Gross decreases for tax positions of prior years — — —
Settlements ———
Lapse of statute of limitations — — —
BALANCE, END OF YEAR $ 0.9 $ $
Included in the balance of uncertain tax benefits as of
September30,2011, is $0.8million of tax benefi ts that, if
recognized, would aff ect the eff ective tax rate. While it is expected
that the amount of unrecognized tax benefi ts will change in the
next twelve months, the Company does not expect this change
to have a material impact on the results of operations or the
fi nancial position of the Company.
e Company recognizes accrued interest and penalties as
a component of income tax expense. Accrued interest and
penalties are included within the related tax liability line in the
consolidated balance sheet. Interest, net of federal benefi t, and
penalties included in the balance as of September30,2011 was
$0.2million.
e Company and its subsidiaries fi le income tax returns with the
U.S. federal jurisdiction and various state and foreign jurisdictions.
e Internal Revenue Service has commenced an examination of
the U.S. income tax return of FCStone for its fi scal year ended
August31,2009, which was prior to acquisition. FCStone is
a wholly-owned subsidiary acquired on September30,2009.
Additionally, both INTLFCStoneInc. and FCStone are under
separate state examinations for various periods, ranging from
August31,2006 through September30,2009.
NOTE 20 Discontinued Operations
As of December31,2009, the Company owned 80% of
theshares outstanding of Agora-X,LLC (“Agora”) and the
Company’s consolidated balance sheet and income statement as
of December31,2009, refl ected the Company’s consolidation of
Agora. On February12,2010, the Company and NASDAQ OMX
(“NASDAQ”), the noncontrolling interest holder prior to this
purchase transaction, signed a restructuring agreement, eff ective
January1,2010, whereby NASDAQ acquired an additional 65%
interest in Agora in exchange for an investment of $6.6million.
In accordance with the Consolidation Topic of the ASC, since
the Company no longer had a controlling fi nancial interest, it
deconsolidated the subsidiary from the date of the agreement. e
Company retained a 15% noncontrolling ownership interest in
Agora. e Company recorded its retained 15% noncontrolling
interest under the equity method, in accordance with the guidance
in the Investments– Equity Method and Joint Ventures Topic
of the ASC. On June10,2010, the board of directors of Agora
agreed to discontinue the operations of the entity. In evaluating
the fair value of the Company’s investment in Agora during
the third quarter of fi scal year2010, it was determined that its
carrying value would no longer be recoverable and was in fact
impaired. e Company wrote down its investment in Agora to
zero, which resulted in a $0.5million impairment charge. Since
the discontinuation of operations of Agora occurred within the
one year assessment period, beginning with the Company’s loss
of controlling interest, the Company determined that Agora had
met the criteria established with the guidance in the Presentation
of Financial Statements– Discontinued Operations Topic of the
ASC for reporting discontinued operations. In accordance with the
guidance, the results of Agora, including the Company’s 15% share
of the losses and impairment charge for the remaining investment
in Agora from January1,2010 through September30,2010,
were included within discontinued operations, net of tax, on the
consolidated income statement for 2010. For fi scal2010, the
Company recorded a pre-tax gain of $1.9million and a gain,
net of tax, of $1.3million, related to Agora within discontinued
operations. During 2011, the Company recognized a gain of
$0.2million, net of taxes, related to the fi nal liquidation of
Agora, within discontinued operations. e results of Agora
were previously included within the Other segment.
In May2010, the Company sold its interest in INTL Capital
Limited (“INTL Capital”) to an independent third party for a
purchase price equal to book value. e subsidiary operated an
asset management business in Dubai. Subsequent to the sale