INTL FCStone 2012 Annual Report Download - page 77
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Please find page 77 of the 2012 INTL FCStone annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.INTL FCSTONE INC.Form10K 61
PART II
ITEM 8 Financial Statements and Supplementary Data
entitles and obligates the transferor to repurchase or redeem them
before their maturity or (2) the ability to unilaterally cause the
holder to return speci c assets, other than through a cleanup
call. Under this guidance, the Company re ects the customer
collateral assets and corresponding liabilities in the Company’s
consolidated balance sheets as of September 30, 2012 and 2011.
In addition to margin, deposits with exchange-clearing
organizations include guaranty deposits. e guaranty deposits
are held by the clearing organization for use in potential default
situations by one or more members of the clearing organization.
e guaranty deposits may be applied to the Company’s obligations
to the clearing organization, or to the clearing organization’s
obligations to other clearing members or third parties.
e Company maintains customer omnibus and proprietary
accounts with other counterparties, and the equity balances in
those accounts along with any margin cash or securities deposited
with the carrying broker are included in deposits and receivables
from broker-dealers and counterparties.
Receivables from and payables to exchange-clearing organizations
are also comprised of amounts due from or due to exchange-
clearing organizations for daily variation settlements on open
futures and options-on-futures positions. e variation settlements
due from or due to exchange-clearing organizations are paid in
cash on the following business day.
Deposits and receivables with exchange-clearing organizations
also includes the unrealized gains and losses associated with
the customers’ options-on-futures contracts. See discussion in
the Financial Instruments and Derivatives section below for
additional information on the treatment of derivative contracts.
For customer owned derivative contracts, the fair value is o set
against the payable to customers with no impact recognized on
the consolidated income statements.
Receivables from and Payables to Customers
Receivables from customers, net of the allowance for doubtful
accounts, include the total of net de cits in individual exchange-
traded and OTC trading accounts carried by the Company.
Customer de cits arise from realized and unrealized trading
losses on futures, options-on-futures, swaps and forwards and
amounts due on cash and margin transactions. Customer de cit
accounts are reported gross of customer accounts that contain net
credit or positive balances, except where a right of o set exists.
Net de cits in individual exchange-traded and OTC trading
accounts include both secured and unsecured de cit balances
due from customers as of the balance sheet date. Secured de cit
amounts are backed by U.S. Treasury bills and notes with a fair
value of $0.8 million and $0.4 million as of September 30, 2012
and 2011, respectively, and commodity warehouse receipts with
a fair value of $7.5 million and $16.2 million as of September
30, 2012 and 2011, respectively. ese U.S Treasury bills and
notes and commodity warehouse receipts are not netted against
the secured de cit amounts, as the conditions for right of seto
have not been met.
Payables to customers represent the total of customer accounts
with credit or positive balances. Customer accounts are used
primarily in connection with commodity transactions and include
gains and losses on open commodity trades as well as securities
and other deposits made as required by the Company or the
exchange-clearing organizations or counterparties. Customer
accounts with credit or positive balances are reported gross of
customer de cit accounts, except where a right of o set exists.
For regulatory purposes, certain customers, which would include
persons who are a liated with the Company or are principals,
such as an o cer or director, and any person who is materially
involved in the management of the Company, are identi ed as
noncustomers. A noncustomer account may not be carried as a
customer account due to an a liation with the Company. In a
liquidation event, amounts owed to noncustomers are paid in
the same priority as amounts owed to general creditors of the
Company. ese accounts are also referred to as proprietary
accounts. e amounts related to noncustomer accounts are
included in ‘payables to customers’ on the consolidated balance
sheets.
e future collectability of the receivables from customers can
be impacted by the Company’s collection e orts, the nancial
stability of its customers, and the general economic climate
in which it operates. e Company evaluates accounts that it
believes may become uncollectible on a speci c identi cation
basis, through reviewing daily margin de cit reports, the historical
daily aging of the receivables, and by monitoring the nancial
strength of its customers. e Company may unilaterally close
customer trading positions in certain circumstances. In addition,
to evaluate customer margining and collateral requirements,
customer positions are stress tested regularly and monitored for
excessive concentration levels relative to the overall market size.
e Company generally charges o an outstanding receivable
balance when all economically sensible means of recovery have
been exhausted. at determination considers information
such as the occurrence of signi cant changes in the customer’s
nancial position such that the customer can no longer pay
the obligation, or that the proceeds from collateral will not be
su cient to pay the balance.
Notes Receivable
e Company originates short-term notes receivable from
customers with the outstanding balances being insured 90% to
98% by a third party, including accrued interest. e Company
may sell the insured portion of the notes through non-recourse
participation agreements with other third parties. See discussion
of notes receivable related to commodity repurchase agreements
below.
Accrual of commodity financing income on any note is
discontinued when, in the opinion of management, there is
reasonable doubt as to the timely collectability of interest or
principal. Nonaccrual notes are returned to an accrual status
when, in the opinion of management, the nancial position of