INTL FCStone 2014 Annual Report Download - page 88

INTL FCSTONE INC.  Form 10K72
PART II
ITEM 8 Financial Statements and Supplementary Data
e dilutive effect of share-based awards is reflected in diluted
net income per share by application of the treasury stock method,
which includes consideration of unamortized share-based
compensation expense required under the Compensation –
Stock Compensation Topic of the ASC.
Options to purchase 1,120,985, 1,447,688 and 1,157,601
shares of common stock for fiscal years ended September 30,
2014, 2013 and 2012, respectively, were excluded from the
calculation of diluted earnings per share because they would
have been anti-dilutive.
NOTE 3 Assets and Liabilities, at Fair Value
e Company’s financial and nonfinancial assets and liabilities
reported at fair value are included in the following captions on
the consolidated balance sheets:
•Cash and cash equivalents
•Cash, securities and other assets segregated under federal and
other regulations
•
Deposits and receivables from exchange-clearing organizations,
broker-dealers, clearing organizations and counterparties
•Financial instruments owned
•Accounts payable and other accrued liabilities
•Payable to customers
•
Payable to broker-dealers, clearing organizations and
counterparties
•Financial instruments sold, not yet purchased
Fair Value Hierarchy
As required by the Fair Value Measurement Topic of the ASC,
financial and nonfinancial assets and liabilities are classified in
their entirety based on the lowest level of input that is significant
to the fair value measurement. e hierarchy gives the highest
priority to unadjusted quoted prices in active markets for identical
assets or liabilities (Level 1 measurements) and the lowest priority
to unobservable inputs (Level 3 measurements). A market is
active if there are sufficient transactions on an ongoing basis
to provide current pricing information for the asset or liability,
pricing information is released publicly, and price quotations
do not vary substantially either over time or among market
makers. Observable inputs reflect the assumptions market
participants would use in pricing the asset or liability developed
based on market data obtained from sources independent of the
reporting entity. e guidance requires the Company to consider
counterparty credit risk of all parties to outstanding derivative
instruments that would be considered by a market participant
in the transfer or settlement of such contracts (exit price).
e Company’s exposure to credit risk on derivative financial
instruments relates to the portfolio of OTC derivative contracts
as all exchange-traded contracts held can be settled on an active
market with the credit guarantee by the respective exchange. e
Company requires each counterparty to deposit margin collateral
for all OTC instruments and is also required to deposit margin
collateral with counterparties. e Company has assessed the
nature of these deposits and used its discretion to adjust each based
on the underlying credit considerations for the counterparty and
determined that the collateral deposits minimize the exposure
to counterparty credit risk in the evaluation of the fair value of
OTC instruments as determined by a market participant.
e majority of financial assets and liabilities on the consolidated
balance sheets are reported at fair value. Cash is reported at
the balance held at financial institutions. Cash equivalents
includes money market funds, which are valued at period-end
at the net asset value provided by the fund’s administrator, and
certificates of deposit, which are stated at cost plus accrued
interest, which approximates fair value. Cash, securities and other
assets segregated under federal and other regulations include
the value of cash collateral as well as the value of other pledged
investments, primarily U.S. Treasury bills and obligations issued
by government sponsored entities and commodities warehouse
receipts. Deposits with and receivables from exchange-clearing
organizations and broker-dealers, clearing organizations and
counterparties and payable to customers and broker-dealers,
clearing organizations and counterparties include the value of cash
collateral as well as the value of money market funds and other
pledged investments, primarily U.S. Treasury bills and obligations
issued by government sponsored entities and mortgage-backed
securities. ese balances also include the fair value of exchange-
traded futures and options on futures and exchange-cleared swaps
and options determined by prices on the applicable exchange.
Financial instruments owned and sold, not yet purchased include
the value of U.S. and foreign government obligations, corporate
debt securities, derivative financial instruments, commodities,
mutual funds and investments in managed funds. e fair value of
exchange common stock is determined by quoted market prices,
and the fair value of exchange memberships is determined by
recent sale transactions. Payables to lenders under loans carry
variable rates of interest and thus approximate fair value. e
fair value of the Company’s senior unsecured notes is estimated
to be $47.0 million (carrying value of $45.5 million) as of
September 30, 2014, based on the transaction prices at public
exchanges for the same or similar issues.
e fair value estimates presented herein are based on pertinent
information available to management as of September 30, 2014
and 2013. Although management is not aware of any factors
that would significantly affect the estimated fair value amounts,
such amounts have not been comprehensively revalued for
purposes of these financial statements since that date and current
estimates of fair value may differ significantly from the amounts
presented herein.