INTL FCStone 2013 Annual Report Download - page 92

INTLFCSTONEINC.Form10K 71
PART II
ITEM 8Financial Statements and Supplementary Data
Compensation and Benets
Compensation and benets consists primarily of salaries, incentive
compensation, commissions, related payroll taxes and employee
benets. e Company classies employees as either traders /
risk management consultants, operational or administrative
personnel, which includes the executive ocers. e most
signi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
rst quarter of 2006, the Company adopted the guidance under
the Compensation-Stock Compensation Topic of the ASC using
the modi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.
Transaction-Based Clearing Expenses
Clearing fees and related expenses include primarily variable expenses
for clearing and settlement services, including fees the Company
pays to executing brokers, exchanges, clearing organizations and
banks. ese fees are based on transaction volume, and recorded as
expense on the trade date. Clearing fees are passed on to customers
and are presented gross in the consolidated statements of income
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. e Company directly provides
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, state and local and
foreign income taxes. Certain items of income and expense are
not reported in tax returns and nancial statements in the same
year. e tax eect of such temporary di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 aecting stockholders’ equity that, under U.S. GAAP,
are excluded from net income. Other comprehensive income
(loss) includes net actuarial losses from dened benet pension
plans, unrealized gains and losses on available-for-sale securities,
gains and losses on foreign currency translations, and changes in
the fair value of interest rate swap agreements, to the extent they
are, or previously were, eective as cash ow hedges.
Noncontrolling Interest and Variable Interest
Entities
In accordance with the Consolidation Topic of the Accounting
Standards Codication (“ASC”) the Company consolidates any
variable interest entities for which it is the primary beneciary, as
dened. e Company applies the equity method of accounting
when the Company does not have a controlling interest in an
entity, but exerts signicant inuence over the entity.
e Company had a majority interest in and was the general
partner of the Blackthorn Multi-Advisor Fund, LP (the “Blackthorn
Fund”), whose assets, liabilities, income and expenses were included
in the Company’s consolidated nancial statements. During
scal 2012, the Company redeemed its remaining investment
in Blackthorn Fund eective December 31, 2011. As a result
of the nal redemption, the Company no longer retains any
ownership interests in the Blackthorn Fund, has transferred its
rights as general partner and deconsolidated its interest in the
Blackthorn Fund as of December 31, 2011. e aggregate of
the redemption and remaining noncontrolling interest less the
carrying amount of the net assets of the Blackthorn Fund resulted
in a nominal gain and was recorded as a component of ‘trading
gains, net’ in the consolidated income statement for the year
ended September 30, 2012, as a result of the deconsolidation.
Preferred Stock
e Company is authorized to issue one million shares 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 September 30, 2013 and 2012, no preferred shares were
outstanding and the Company’s board of directors had not yet
established any class or series of shares.