INTL FCStone 2013 Annual Report Download - page 85

INTLFCSTONEINC.Form10K64
PART II
ITEM 8Financial Statements and Supplementary Data
Notes to Consolidated Financial Statements
NOTE 1 Description of Business and Signicant Accounting Policies
INTL FCStone Inc., a Delaware corporation, and its consolidated
subsidiaries (collectively “INTL” or “the Company”), form
a nancial services group focused on domestic and select
international markets. The Company’s services include
comprehensive risk management advisory services for commercial
customers; execution of listed futures and options-on-futures
contracts on all major commodity exchanges; structured over-
the-counter (“OTC”) products in a wide range of commodities;
physical trading and hedging of precious and base metals and select
other commodities; trading of more than 130 foreign currencies;
market-making in international equities; debt origination and
asset management.
e Company provides these services to a diverse group of
more than 20,000 accounts, representing approximately 11,000
consolidated customers located throughout the world, including
producers, processors and end-users of nearly all widely-traded
physical commodities to manage their risks and enhance margins;
to commercial counterparties who are end-users of the rm’s
products and services; to governmental and non-governmental
organizations; and to commercial banks, brokers, institutional
investors and major investment banks.
Basis of Presentation
e accompanying consolidated nancial statements include the
accounts of INTL FCStone Inc. and all other entities in which
the Company has a controlling nancial interest. All material
intercompany transactions and balances have been eliminated
in consolidation.
Unless otherwise stated herein, all references to scal 2013,
scal 2012, and scal 2011 refer to the Company’s scal years
ended September 30.
Reclassications
Certain amounts previously reported have been reclassied to
conform to the current period presentation. e reclassications
were made to change the income statement presentation
to provide the users of the nancial statements additional
information related to the operating results of the Company.
ese reclassications include reclassifying transaction-based
clearing expenses and introducing broker commissions separately
from compensation and other expenses, and as components
along with interest expense in arriving at net operating revenues.
Additionally, travel and business development expenses were
previously included in ‘other’ expense. e reclassications
had no eect on consolidated net income or consolidated
assets and liabilities.
Use of Estimates
e preparation of consolidated 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 aect the reported amounts of
assets and liabilities, disclosure of contingent liabilities as of
the date of the nancial statements and the reported amounts
of revenue and expenses during the reporting period. e most
signicant of these estimates and assumptions relate to fair value
measurements for 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. ese estimates are based
on management’s best knowledge of current events and actions
the Company may undertake in the future. e Company reviews
all signicant estimates aecting the nancial statements on a
recurring basis and records the eect of any necessary adjustments
prior to their issuance. Although these and other estimates and
assumptions are based on the best available information, actual
results could be materially di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 nancial
statements of a non-United States (“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 stockholders’ equity. Foreign currency remeasurement gains or
losses on transactions in nonfunctional currencies are included
in ‘trading gains, net’ in the consolidated income statements.
Cash and Cash Equivalents
e Company considers cash held at banks and all highly liquid
investments, including certi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