INTL FCStone 2012 Annual Report Download - page 80
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Please find page 80 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.Form10K64
PART II
ITEM 8 Financial Statements and Supplementary Data
(“CBOT”), the Board of Trade of Kansas City, Missouri, Inc.
(“KCBT”), the Minnesota Grain Exchange, the New York
Mercantile Exchange (“NYMEX”), the COMEX Division of the
New York Mercantile Exchange, Mercado de Valores de Buenos
Aires S.A. (“MERVAL”), the Chicago Mercantile Exchange
(“CME”) Growth and Emerging Markets, InterContinental
Exchange, Inc. (“ICE”) Futures US, ICE Europe Ltd and London
Metal Exchange (“LME”). Exchange rm common stock include
shares of CME Group, Inc., ICE and LME. In December 2012,
the CME completed its acquisition of the KCBT. e Company
expects to receive proceeds of $1.5 million and recognize a gain
of $0.9 million before taxes, in connection with its class A shares
of the KCBT held as of September30, 2012, during the rst
quarter of scal year 2013.
Exchange memberships and rm common stocks pledged for
clearing purposes are recorded at cost, in accordance with U.S.
GAAP and CFTC regulations and are included within ‘other
assets’ on the consolidated balance sheets. Equity investments in
exchange rm common stock not pledged for clearing purposes
are classi ed as available-for-sale and recorded at fair value, with
unrealized gains and losses recorded as a component of OCI,
net of tax, until realized. Equity investments in exchange rm
common stock not pledged for clearing purposes are included
within ‘ nancial instruments owned’ on the consolidated balance
sheets.
e Company acquired shares of the LME during the year ended
September30, 2011 at a cost of $3.4 million. In January 2011,
excess shares of exchange rm common stock, with a cost basis
of $1.2 million, were sold, resulting in a nominal gain. In July
2011, the CME Group removed the requirement of its member
rms to hold a speci ed quantity of its exchange rm common
stock in order to process trades directly with the exchange. Since
the shares of CME Group common stock are no longer pledged
for clearing purposes, during the scal year ended September30,
2011, the Company designated the shares as available-for-sale and
recorded them at fair value within ‘ nancial instruments owned’
in the consolidated balance sheets. See Note 3 for additional
discussion of equity investments in exchange rm common
stock not pledged for clearing purposes.
e cost basis for exchange memberships and rm common
stock pledged for clearing purposes was $10.5 million and $10.3
million as of September 30, 2012 and 2011, respectively. e fair
value of exchange memberships and rm common stock pledged
for clearing purposes was $8.9 million and $10.5 million as of
September 30, 2012 and 2011, respectively. e fair value of
exchange rm common stock is determined by quoted market
prices, and the fair value of exchange memberships is determined
by recent sale transactions. e Company monitors the fair value
of exchange membership seats and rm common stock on a
quarterly basis, and does not consider any current unrealized
losses on individual exchange memberships to be anything other
than a temporary impairment.
Commodity and Other Repurchase
Agreements
In the normal course of operations the Company accepts notes
receivable under sale/repurchase agreements with customers
whereby the customers sell certain commodity inventory or other
investments and agree to repurchase the commodity inventory
or investment at a future date at either a xed or oating rate.
ese transactions are short-term in nature, and in accordance
with the guidance contained in the Transfers and Servicing
Topic of the ASC, are treated as secured borrowings rather than
commodity inventory and purchases and sales in the Company’s
consolidated nancial statements.
Additionally, the Company participates in transactions involving
commodities or other investments sold under repurchase
agreements (“repos”). In accordance with the guidance contained
in the Transfers and Servicing Topic of the ASC, these transactions
are treated as secured borrowings that are recorded as a liability
in the consolidated balance sheets. Commodities or investments
sold under repurchase agreements are re ected at the amount of
cash received in connection with the transactions. e Company
may be required to provide additional collateral based on the
fair value of the underlying asset.
Business Combinations
Acquisitions during scal 2012 and 2011 are accounted for
as business combinations in accordance with the provisions
of the Business Combinations Topic of the ASC. Under this
accounting guidance most of the assets and liabilities acquired
and assumed are measured at fair value as of the acquisition date.
Certain contingent liabilities acquired require remeasurement at
fair value in each subsequent reporting period. Noncontrolling
interests are initially measured at fair value and classi ed as a
separate component of equity. Acquisition related costs, such
as fees for attorneys, accountants, and investment bankers, are
expensed as incurred and are not capitalized as part of the purchase
price. For all acquisitions, regardless of the consummation date,
deferred tax assets, valuation allowances, and uncertain tax
position adjustments occurring after the measurement period
are recorded as a component of income, rather than adjusted
through goodwill.
Determining the fair value of certain assets and liabilities acquired
is subjective in nature and often involves the use of signi cant
estimates and assumptions. Estimating the fair value of the assets
and liabilities acquired requires signi cant judgment.
Revenue Recognition
Sales of physical commodities revenue are recognized when
persuasive evidence of an arrangement exists, delivery has occurred,
the fee is xed or determinable, and collectability is reasonably
assured. e Company reports its physical commodities revenues