INTL FCStone 2011 Annual Report Download - page 71

INTL FCSTONE INC.Form10K 57
PART II
ITEM 8 Consolidated Financial Statements and Supplementary Data
Notes to Consolidated Financial Statements
NOTE 1 Description of Business and Signifi cant Accounting Policies
INTLFCStoneInc., formerly known as International
Assets Holding Corporation, a Delaware corporation, and
its consolidated subsidiaries (collectively “INTL” or “the
Company”), form a  nancial services group focused on domestic
and select international markets.  e Company’s services include
comprehensive risk management advisory services for commercial
customers; execution of listed futures and options on futures
contracts on all major commodity exchanges; structured over-
the-counter (“OTC”) products in a wide range of commodities;
physical trading and hedging of precious and base metals and select
other commodities; trading of more than 130foreign currencies;
market-making in international equities; debt origination and
asset management.
 e Company provides these services to a diverse group of more
than 20,000customers located throughout the world, including
producers, processors and end-users of nearly all widely-traded
physical commodities to manage their risks and enhance margins;
to commercial counterparties who are end-users of the fi rm’s
products and services; to governmental and non-governmental
organizations; and to commercial banks, brokers, institutional
investors and major investment banks.
 e Company entered into an Agreement and Plan of Merger
dated July1,2009, with FCStone Group,Inc. (“FCStone”)
that was approved by the stockholders of the Company on
September25,2009 and was eff ective on September30,2009
(the “FCStone transaction”).  e conclusion of the transaction
on September30,2009, the last day of the previous fi scal year,
means that the consolidated income statements of the Company
for the years ended September30,2011 and 2010 include the
results of FCStone, and the consolidated income statement for the
year ended September30,2009 refl ects the results of INTL as it
existed before the transaction except for the extraordinary gain.
 e consolidated balance sheets as of September30,2011 and
2010 refl ect the fi nancial condition of INTL after the FCStone
transaction. See additional discussion of the transaction in Note18.
Prior to the acquisition of FCStone in September2009, the
Company’s activities were divided into fi ve reportable segments:
International Equities Market-making, Foreign Exchange Trading,
Commodities Trading, International Debt Capital Markets and
Asset Management.  e Company revised its segment reporting as
a result of the FCStone transaction, and the Company’s activities
are now divided into the following fi ve reportable segments:
•Commodity and Risk Management Services (“C&RM”)
•Foreign Exchange
•Securities
•Clearing and Execution Services (“CES”)
•Other
To c o n f o rm t o t h e c u r re n t se g m e n t p r es e n t a ti o n , t h e C o m p a n y
has restated certain segment information for the year ended
September30,2009 (see Note22).
Basis of Presentation
 e accompanying consolidated fi nancial statements include
the accounts of INTLFCStoneInc. and all other entities in
which the Company has a controlling fi nancial interest. All
material intercompany transactions and balances have been
eliminated in consolidation. All adjustments that, in the opinion
of management and consisting only of a normal and recurring
nature, are necessary for a fair presentation for the periods
presented have been refl ected.
In accordance with the Consolidation Topic of the Accounting
Standards Codifi cation (“ASC”) the Company consolidates any
variable interest entities for which it is the primary benefi ciary, as
defi ned.  e Company applies the equity method of accounting
when the Company does not have a controlling interest in an
entity, but exerts signifi cant infl uence over the entity.
 e Company has a majority interest in the Blackthorn Multi-
Advisor Fund,LP (the “Blackthorn Fund”).  e Blackthorn
Fund is a commodity investment pool, which allocates most of
its assets to third-party commodity trading advisors and other
investment managers.  e Blackthorn Fund engages in speculative
trading of a wide variety of commodity futures and options on
futures contracts, securities and other fi nancial instruments. In
addition to the majority interest that was acquired, a subsidiary
of the Company is also the general partner of the Blackthorn
Fund. Under the provisions of the Consolidations Topic of the
ASC, the Company is required to consolidate the Blackthorn
Fund as a variable interest entity since it is the general partner
and owns a majority interest.  e creditors of the Blackthorn
Fund have no recourse to the general assets of the Company.
The Blackthorn Fund had net assets of $3.2million and
$5.2million as of September30,2011 and 2010, respectively.
 e net assets of the Blackthorn fund consisted of cash and
cash equivalents of $17 thousand and $0.6million, deposits
and receivables from broker-dealers, clearing organizations and
counterparties of $2.6million and $2.8million, investments