INTL FCStone 2011 Annual Report Download - page 78

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INTL FCSTONE INC.Form10K64
PART II
ITEM 8 Consolidated Financial Statements and Supplementary Data
Cost of Revenue
Cost of sales of physical commodities include nished commodity
or raw material and processing costs along with operating costs
relating to the receipt, storage and delivery of the physical
commodities.
Compensation and Benefi ts
Compensation and bene ts consists primarily of salaries, incentive
compensation, commissions, related payroll taxes and employee
bene ts. e Company classifi es employees as either traders /
risk management consultants, operational or administrative
personnel, which includes our executive offi cers. e most
signifi cant component of the Company’s compensation expense
is the employment of the traders / risk management consultants,
who are paid commissions based on the revenues that their
customer portfolios generate. e Company accrues commission
expense on a trade date basis.
Share-Based Compensation
e Company accounts for share-based compensation in
accordance with the guidance of the Compensation-Stock
Compensation Topic of the ASC. e cost of employee services
received in exchange for a share-based award is generally measured
based on the grant-date fair value of the award. Share-based
employee awards that require future service are amortized over
the relevant service period. Expected forfeitures are included in
determining share-based employee compensation expense. In the
fi rst quarter of 2006, the Company adopted the guidance under
the Compensation-Stock Compensation Topic of the ASC using
the modifi ed prospective method. For option awards granted
subsequent to the adoption, compensation cost is recognized
on a straight-line basis over the vesting period for the entire
award. e expense of unvested option awards granted prior
to the adoption are recognized on a straight-line basis, over the
balance of the vesting period.
Clearing and Related Expenses
Clearing fees and related expenses include expenses for exchange-
traded futures and options on futures clearing and settlement
services, including fees the Company pays to the exchanges and
the fl oor pit brokers. ese fees are based on transaction volume,
and recorded as expense on the trade date. Clearing fees are passed
on to our customers and presented gross in the consolidated
statements of operations under the Revenue Recognition Topic of
the ASC, as the Company acts as a principal for these transactions.
Introducing Broker Commissions
Introducing broker commissions include commissions paid to
non-employee third parties that have introduced customers to the
Company. Introducing brokers are individuals or organizations
that maintain relationships with customers and accept futures
and options orders from those customers. We directly provide all
account, transaction and margining services to introducing brokers,
including accepting money, securities and property from the
customers. e commissions are determined and settled monthly.
Income Taxes
Income tax expense includes U.S. federal and state and foreign
income taxes. Certain items of income and expense are not
reported in tax returns and fi nancial statements in the same
year. e tax eff ect of such temporary diff erences is reported as
deferred income taxes. Tax provisions are computed in accordance
with the Income Taxes Topic of the ASC.
Comprehensive Income
Comprehensive income consists of net income and other gains
and losses aff ecting stockholders’ equity that, under U.S. GAAP,
are excluded from net income. Other comprehensive income (loss)
includes net actuarial losses from defi ned benefi t pension plans,
unrealized gains and losses on available-for-sale securities, and
changes in the fair value of interest rate swap agreements, to the
extent they are, or previously were, eff ective as cash fl ow hedges.
Preferred Stock
e Company is authorized to issue onemillionshares of preferred
stock, par value of $0.01 per share, in one or more classes or
series to be established by the Company’s board of directors.
As of September30,2011 and 2010, no preferredshares were
outstanding and the Company’s board of directors had not yet
established any class or series ofshares.
Reclassifi cations
During the year ended September30,2011, the Company
reclassifi ed give-up fee revenue in the consolidated income
statement to ‘commission and clearing fees’, from ‘consulting and
management fees’. Reclassifi cation in the amount of $1.9million
has been made to the year ended September30,2010 to conform
to the current year presentation. is reclassifi cation had no
eff ect on previously reported total or net revenues.
Recent Accounting Pronouncements
In June2009, new guidance was issued on transfers and servicing
of fi nancial assets to eliminate the concept of a qualifying special-
purpose entity, change the requirements for off balance sheet
accounting for fi nancial assets including limiting the circumstances
where off balance sheet treatment for a portion of a fi nancial asset
is allowable, and require additional disclosures. e guidance