INTL FCStone 2014 Annual Report Download - page 81

INTL FCSTONE INC.  Form 10K 65
PART II
ITEM 8 Financial Statements and Supplementary Data
Physical Commodities Inventory
Physical commodities inventories are stated at the lower of cost
or market (“LCM”), using the weighted-average price and first-in
first-out costing method. Cost includes finished commodity or
raw material and processing costs related to the purchase and
processing of inventories.
Property and Equipment
Property and equipment is stated at cost, net of accumulated
depreciation and amortization and depreciated using the straight-
line method over the estimated useful lives of the assets. Leasehold
improvements are amortized on a straight-line basis over the
estimated useful life of the improvement or the term of the
lease, whichever is shorter. Certain costs of software developed
or obtained for internal use are capitalized and amortized
over the estimated useful life of the software. Expenditures
for maintenance, repairs, and minor replacements are charged
against earnings, as incurred. Expenditures that increase the value
or productive capacity of assets are capitalized. When property
and equipment are retired, sold, or otherwise disposed of, the
asset’s carrying amount and related accumulated depreciation
are removed from the accounts and any gain or loss is included
in earnings.
Goodwill and Identifiable Intangible Assets
Goodwill is the cost of acquired companies in excess of the
fair value of identifiable net assets at acquisition date. In
accordance with the Intangibles – Goodwill and Other Topic
of the ASC, goodwill is tested for impairment on an annual basis
at the fiscal year-end, and between annual tests if indicators of
potential impairment exist, using a fair-value-based approach.
No impairment of goodwill has been identified during any of
the periods presented.
Identifiable intangible assets subject to amortization are amortized
using the straight-line method over their estimated period of
benefit, ranging from two to twenty years. Identifiable intangible
assets are tested for impairment whenever events or changes in
circumstances suggest that an asset’s or asset group’s carrying
value may not be fully recoverable in accordance with the
Intangibles – Goodwill and Other Topic of the ASC. Residual
value is presumed to be zero. Identifiable intangible assets not
subject to amortization are reviewed at each reporting period to
re-evaluate if the intangible asset’s useful life remains indefinite.
Additionally, intangible assets not subject to amortization are
tested annually for impairment at the fiscal year-end, and between
annual tests if indicators of potential impairment exist, using a fair-
value-based approach. See Note 9 for discussion of impairments
of intangible assets that have been identified during the fiscal
year ended September 30, 2013.
Financial Instruments and Derivatives
Financial instruments owned and sold, not yet purchased, at
fair value consist of financial instruments carried at fair value
or amounts that approximate fair value, with related unrealized
changes in gains or losses recognized in earnings, except for
securities classified as available-for-sale. e fair value of a
financial instrument is the amount at which the instrument
could be exchanged in a current transaction between willing
parties, other than in a forced or liquidation sale.
e Company accounts for its securities pledged on behalf of
customers and proprietary securities in accordance with the
Investments – Debt and Equity Securities Topic in the ASC.
In accordance with this guidance, the Company determines
the appropriate classification of its investments as trading,
available-for-sale, or held-to-maturity at the time of purchase
and reevaluates the designation as of each reporting period.
e Company has classified certain U.S. government obligations
and exchange firm common stock not pledged for clearing
purposes as available-for-sale, which are carried at fair value based
on observable or quoted market prices and associated unrealized
gains or losses are recorded as a component of OCI, net of tax,
until realized, unless an unrealized loss is determined to be other
than temporary, in which case such loss is charged to earnings. e
Company classifies those securities as available-for-sale because it
would consider selling them prior to maturity to meet liquidity
needs or as part of the Company’s risk management program.
e Company computes the cost of its securities on a specific
identification basis. Such cost includes the direct costs to acquire
securities, adjusted for the amortization of any discount or premium.
e amortized cost of securities is computed under the effective-
interest method and is included in interest income. Realized gains
and losses, declines in value judged to be other than temporary and
interest on available-for-sale securities are included in earnings.
Investment in managed funds, at fair value represents investments
in funds managed by the Company’s fund managers. e
investments are valued at period-end at the net asset value
provided by the fund’s administrator.
Commodities warehouse receipts are valued at the cash price, or the
nearby futures prices in the absence of a cash price, for the commodity
based on published market quotes. For commodities warehouse
receipts, the change in fair value is offset against the payable to
customers with no impact on the consolidated income statements.
e Company utilizes derivative instruments to manage exposures
to foreign currency, commodity price and interest rate risks for
the Company and its customers. e Company’s objectives for
holding derivatives include reducing, eliminating, and efficiently
managing the economic impact of these exposures as effectively
as possible. Derivative instruments are recognized as either assets
or liabilities and are measured at fair value. e accounting for