Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2012

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

2.      Summary of Significant Accounting Policies

Presentation and Basis of Financial Statements

The accompanying unaudited condensed consolidated financial statements include the accounts of Forex International Trading Corp. and its consolidated subsidiaries (“Forex” or the Company”) and have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and reports and with the instructions to  Form 10-Q and Rule 10-01 of  Regulation S-X. Accordingly, they do not include all, or include a condensed version of, the information and footnotes required by U.S. GAAP for complete financial statements. The Company believes, however, that the disclosures are adequate to make the information presented not misleading. The Company’s condensed consolidated financial statements reflect all adjustments (consisting solely of normal recurring adjustments) which are, in the opinion of management, necessary for the fair presentation of the consolidated financial position and the consolidated results of operations of the Company for the periods shown. Results shown for the interim periods are not necessarily indicative of the results to be obtained for a full fiscal year or for any future period. The preparation of financial statements in conformity with U.S. GAAP requires us to make estimates, judgments and assumptions that affect the amounts reported in the condensed financial statements. Actual results might differ from management’s estimates.

The consolidated balance sheet information as of December 31, 2011 was derived from the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K filed with Securities and Exchange Commission (“SEC”) for the fiscal year ended December 31, 2011. These interim condensed consolidated financial statements should be read in conjunction with the Company’s most recently audited financial statements and in the above referenced Annual Report on Form 10-K.

All intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods.  Significant estimates include the useful lives of tangible and intangible assets, depreciation and amortization, allowances for doubtful accounts and loan losses, valuation of common and preferred stock issuances, and the valuation allowance on deferred tax assets.  Actual results could differ from those estimates.

Cash and Cash Equivalents

The Company considers all highly liquid financial instruments purchased with an original maturity of three months or less to be cash equivalents.

Notes and Short-Term Receivable

The note and short-term receivable are carried at cost, which approximates fair value.  The Company measures the impairment of loans based on its historical loan collection experience and existing economic conditions.  Impairment is recognized when management believes it is probable that payments will not be received on some portion of the loan, which is determined on an individual loan basis.  The Company evaluates loans for impairment on an annual basis or when there are indications that the loan may not be collected.  When management determines that a loan is impaired it is placed on non-accrual status, and an allowance for loan losses is established to recognize the estimated amount of impairment.  Payments received on non-accrual loans are generally applied to the outstanding principal balance.  Loans are removed from non-accrual status when management believes that the borrower will resume making the payments required by the loan agreement.

Property and Equipment

Property and equipment are stated at cost and the related depreciation is computed using the straight-line method over the estimated useful lives of the respective assets.  Expenditures for repairs and maintenance are charged to operations as incurred.  Renewals and betterments are capitalized.  Upon the sale or retirement of an asset, the related costs and accumulated depreciation are removed from the accounts and any gain or loss is recognized in the results of operations.

Leasehold improvements are amortized over the lesser of the estimated life of the asset or the lease term.

As required by U.S. GAAP for long-lived assets, the Company evaluates the fair value of its property and equipment on an annual basis or whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable.  Any impairment of value is recognized when the carrying amount of the asset exceeds its fair value.  There were no impairment losses for the three and nine months ended September 30, 2012 and 2011.

Treasury Stock

Treasury stock is recorded at cost.  The re-issuance of treasury shares is accounted for on a first in, first-out basis and any difference between the cost of treasury shares and the re-issuance proceeds are charged or credited to additional paid-in capital.

Income Taxes

The Company accounts for income taxes using the liability method, which provides for an asset and liability approach to accounting for income taxes.  Under this method, deferred tax assets and liabilities are recorded for future tax effects of temporary differences between the financial reporting and tax basis of assets and liabilities, and measured using the current tax rates and laws that are expected to be in effect when the underlying assets or liabilities are anticipated to be recovered or settled.  Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount of tax benefits expected to be realized.

U.S. GAAP requires that, in applying the liability method, the financial statement effects of an uncertain tax position be recognized based on the outcome that is more likely than not to occur.  Under this criterion the most likely resolution of an uncertain tax position should be analyzed based on technical merits and on the outcome that would likely be sustained under examination.  The Company had no uncertain tax positions as of September 30, 2012, and is current in its tax filings...

Revenue Recognition

Income from foreign currency operations is earned by referring potential customers to foreign exchange trading companies.  Foreign exchange trading companies remit a percentage of their revenues to the Company in exchange for customer leads, which the Company recognizes when the exchange trading occurs.

The Company recognizes consulting fees when services have been rendered.

Share-Based Compensation

The Company calculates stock-based compensation expense including compensation expense for all share-based payment awards made to employees and directors including employee stock options, stock appreciation rights and restricted stock awards based on their estimated grant date fair values.  The value of the portion of the award that is ultimately expected to vest is recognized as an expense on a straight-line basis over any required service period.  No such expenses were recognized for the three and nine months ended September 30, 2012 and 2011.  

Earnings (Loss) Per Share

Basic earnings (loss) per share is computed by dividing net income (loss) available to common stockholders by the weighted-average number of common shares outstanding for the period.  Diluted earnings (loss) per share considers the potential dilution that could occur if securities or other contracts to issue common stock were exercised or could otherwise cause the issuance of common stock, such as options, convertible notes and convertible preferred stock, were exercised or converted into common stock or could otherwise cause the issuance of common stock that then shared in earnings (loss).  Such potential additional common shares are included in the computation of diluted earnings per share.  Diluted loss per share has  not been computed for the three and nine months ended September 30, 2012 and 2011 because any potential additional common shares would reduce the reported loss per share and therefore have an antidilutive effect.

Going Concern

The accompanying financial statements have been prepared assuming the Company will continue as a going concern.  The future of the Company is dependent upon its ability to raise equity and debt financing, generate revenues and upon future profitable operations from the development of new business opportunities.  The financial statements do not include any adjustments relating to the recoverability of the Company’s assets or the payment of its liabilities in the event the Company cannot continue in existence.

Reclassifications

Certain reclassifications have been made to the prior years’ consolidated condensed financial statements to conform to the current year’s presentation.