INTL FCStone 2013 Annual Report Download - page 122

INTLFCSTONEINC.Form10K 101
PART II
ITEM 8Financial Statements and Supplementary Data
e components of deferred income tax assets and liabilities were as follows:
(in millions) September 30, 2013 September 30, 2012
(As Restated)
Deferred tax assets:
Share-based compensation $ 2.7 $ 2.5
Pension liability 3.4 6.1
Deferred compensation 2.3 3.2
Foreign net operating loss carryforwards 1.9 2.0
U.S. State and local net operating loss carryforwards 4.9 4.9
U.S. Federal net operating loss carryforwards 7.3 —
Intangible assets 6.9 6.1
Capital loss carryforwards 0.7 1.1
Bad debt reserve 0.2 0.1
Foreign tax credit 0.1 0.3
Other compensation 1.6 4.5
Other 1.4 1.2
Total gross deferred tax assets 33.4 32.0
Less valuation allowance (2.3) (4.1)
Deferred tax assets 31.1 27.9
Deferred income tax liabilities:
Unrealized gain on securities 1.3 3.1
Prepaid expenses 0.9 1.1
Fixed assets 3.4 3.8
Deferred income tax liabilities 5.6 8.0
NET DEFERRED TAX ASSETS $ 25.5 $ 19.9
Deferred income tax balances reect the eects of temporary
dierences between the carrying amounts of assets and liabilities
and their tax bases and are stated at enacted tax rates expected to
be in eect when taxes are actually paid or recovered.
As of September 30, 2013 and 2012, the Company has net
operating loss carryforwards for U.S. federal, state, and local and
foreign income tax purposes of $11.8 million and $2.8 million,
net of valuation allowances, respectively, which are available to
oset future taxable income in these jurisdications. e U.S.
federal net operating loss carryforward of $7.3 million expires
in 2033. e state and local net operating loss carryforwards
of $4.5 million, net of valuation allowance, expire in tax years
ranging from 2020 through 2033.
e valuation allowance for deferred tax assets as of September30,
2013 was $2.3 million. e net change in the total valuation
allowance for the year ended September 30, 2013 was a decrease of
$1.8 million. e valuation allowances as of September 30,2013
and 2012 were primarily related to U.S. state and local and
foreign net operating loss carryforwards that, in the judgment
of management, are not more likely than not to be realized. In
assessing the realizability of deferred tax assets, management
considers whether it is more likely than not that some or all of
the deferred tax assets will not be realized.
e Company incurred U.S. federal, state, and local taxable
(losses) income for the years ended September 30, 2013, 2012
and 2011 of $(22.2) million, $(21.2) million, and $22.7 million,
respectively. ere are no signicant dierences between actual
levels of past taxable income and the results of continuing
operations, before income taxes in these jurisdictions. U.S. federal,
state, and local taxable losses incurred during the years ended
September 30, 2013 and 2012 were attributable to a decrease
in exchange-traded and OTC derivative transactional volumes
and revenue caused by consecutive droughts in the U.S., as well
as losses incurred in the physical base metals business. During2013,
the Company elected to pursue an exit of its physical base metals
business through an orderly liquidation of open positions.
Additionally, the Company completed an acquisition of the
accounts of Tradewire Securities. Although both the exit of the
physical base metals business and the acquisition of the Tradewire
Securities accounts are expected to positively aect future levels of
taxable income, the expected impact cannot be reliably projected.
When evaluating if U.S. federal, state, and local deferred taxes
are realizable, the Company considered deferred tax liabilities
of $4.3 million that are scheduled to reverse from 2014 to
2018 and $1.3 million of deferred tax liabilities associated with
unrealized gains in securities which the Company could sell,
if necessary. Furthermore, the Company considered its ability
to implement business and tax planning strategies that would
allow the remaining U.S. federal, state, and local deferred tax
assets, net of valuation allowances, to be realized within 16 years.
Based on the tax planning strategies that can be implemented,
management believes that it is more likely than not that the
Company will realize the tax benet of the deferred tax assets,
net of the existing valuation allowance, in the future.