INTL FCStone 2011 Annual Report Download - page 72

INTL FCSTONE INC.Form10K58
PART II
ITEM 8 Consolidated Financial Statements and Supplementary Data
in managed funds of $1.3million and $1.8million, and
accounts payable and other accrued liabilities of $0.7million
and less than $50 thousand as of September30,2011 and 2010,
respectively. Accordingly, the noncontrolling interest shown in
the consolidated balance sheets includes the noncontrolling
interest of the Blackthorn Fund of $1.3million and $1.6million
as of September30,2011 and 2010, respectively. See Note5
for discussion of fair value of the  nancial assets and liabilities.
Unless otherwise stated herein, all references to 2011,2010, and
2009 refer to the Company’s  scal years ended September30.
Use of Estimates
 e preparation of consolidated fi nancial statements in conformity
with accounting principles generally accepted in the UnitedStates
of America (“U.S. GAAP”) requires management to make estimates
and assumptions that aff ect the reported amounts of assets and
liabilities, disclosure of contingent liabilities as of the date of the
fi nancial statements and the reported amounts of revenue and
expenses during the reporting period.  e most signifi cant of
these estimates and assumptions relate to fair value measurements
for fi nancial instruments and investments, revenue recognition,
the provision for potential losses from bad debts, valuation of
inventories, valuation of goodwill and intangible assets, incomes
taxes and contingencies. Although these and other estimates
and assumptions are based on the best available information,
actual results could be materially diff erent from these estimates.
Foreign Currency Translation
Assets and liabilities recorded in foreign currencies are translated
at the exchange rates prevailing on the balance sheet date. Revenue
and expenses are translated at average rates of exchange prevailing
during the period. Gains or losses on translation of the fi nancial
statements of a non-U.S. operation, when the functional currency
is other than the U.S. dollar, are recorded in other comprehensive
income (“OCI”), net of tax, a component of stockholder’s equity.
Foreign currency remeasurement gains or losses on transactions
in nonfunctional currencies are included within ‘trading gains’
in the consolidated income statements.
Cash and Cash Equivalents
 e Company considers cash held at banks and all highly liquid
investments, including certifi cates of deposit, which may be
withdrawn at any time at the discretion of the Company without
penalty, to be cash and cash equivalents. Cash and cash equivalents
consist of cash, foreign currency, money market funds and
certifi cates of deposit not deposited with or pledged to an
exchange-clearing organization.  e money market funds are
valued at period-end at the net asset value provided by the fund’s
administrator, which approximates fair value. Certifi cates of
deposit are stated at cost plus accrued interest, which approximates
fair value. All cash and cash equivalents deposited with brokers,
dealers and clearing organizations support the Company’s
trading activities, and are subject to contractual restrictions.  e
Company has an investment policy, which limits the maximum
amount placed in any one fund and with any one institution in
order to reduce credit risk.  e Company does not believe that
it is exposed to signifi cant risk on cash and cash equivalents.
Cash, Securities and Other Assets Segregated
under Federal and other Regulations
Pursuant to requirements of the Commodity Exchange Act, funds
deposited by customers relating to futures and options on futures
contracts in regulated commodities must be carried in separate
accounts which are designated as segregated customer accounts.
 e deposits in segregated customer accounts are not commingled
with the funds of the Company. As of September30,2011
and 2010, cash, securities and other assets segregated under
federal and other regulations consisted of cash held at banks
and money market funds of approximately $96.7million and
$14.5million, respectively, U.S. government securities and
federal agency obligations of approximately $3.7million and
$0.8million, respectively, and commodities warehouse receipts
of approximately $19.0million and $0, respectively (see fair
value measurements discussion in Note5).
Securities purchased under agreements to resell
 e Company has an overnight sweep reverse repurchase agreement
program to allow the Company to enter into secured overnight
investments (reverse repurchase agreements or reverse repos),
which generally provides a higher investment yield than a regular
operating account.  e reverse repurchase agreements are recorded
at amounts at which the securities were initially acquired. It is
the policy of the Company to take possession of the securities
purchased under agreements to resell.  e Company receives
U.S. Treasury securities as collateral for the overnight agreements.
 e securities received are recorded at no more than the lesser
of the current fair value of the securities or the net amount to
be realized by the Company upon resale of the securities.  e
maturity of the reverse repurchase agreements is typically one
day, at which point the securities are sold and the proceeds are
returned to the Company, plus any accrued interest.  ere were
no agreements to resell securities as of September30,2011.
Agreements to resell securities in the amount of $342.0million
were outstanding as of September30,2010.