SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The consolidated financial statements reflect the Company's accounts and the accounts of the Company's majority-owned and/or controlled subsidiaries. The Company also consolidates entities that are variable interest entities (“VIEs”) where it has determined that it is the primary beneficiary of such entities. Once it is determined that the Company holds a variable interest in a VIE, management must perform a qualitative analysis to determine (i) if the Company has the power to direct the matters that most significantly impact the VIE's financial performance; and (ii) if the Company has the obligation to absorb the losses of the VIE that could potentially be significant to the VIE or the right to receive the benefits of the VIE that could potentially be significant to the VIE. If the Company's interest possesses both of these characteristics, the Company is deemed to be the primary beneficiary and would be required to consolidate the VIE. The Company will continually assess its involvement with VIEs and reevaluate the requirement to consolidate them. The portions of these entities that the Company does not own are presented as noncontrolling interests as of the dates and for the periods presented in the consolidated financial statements.

Variable interests in the Company's real estate segment have historically related to subordinated financings in the form of mezzanine loans or unconsolidated real estate interests. As of September 30, 2012 and 2011, the Company had one such variable interest that it consolidated. The property underlying this loan was subsequently sold in November 2012 and the loan was resolved. See Note 9 for additional disclosures pertaining to VIEs.

All intercompany transactions and balances have been eliminated in the Company's consolidated financial statements.

Reclassifications and Revisions

Certain reclassifications and revisions have been made to the fiscal 2011 consolidated financial statements to conform to the fiscal 2012 presentation. Real estate assets of a consolidated VIE of $944,000 formerly included in Property and Equipment are now included in Investments in Real Estate to more properly reflect the nature of the asset.

Use of Estimates

Preparation of the Company's consolidated financial statements in conformity with accounting principles generally accepted in the United States (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and costs and expenses during the reporting period. The Company makes estimates of its allowance for credit losses, the valuation allowance against its deferred tax assets, discounts and collectability of management fees, the valuation of stock-based compensation, and in determining whether a decrease in the fair value of an investment is an other-than-temporary impairment. The financial fund management segment makes assumptions in determining the fair value of its investments in investment securities and in estimating the liability, if any, for clawback provisions on certain of its partnership interests. The Company used assumptions, specifically inputs to the Black-Scholes pricing model and the discounted cash flow model, in computing the fair value of the Senior Notes and warrants that it issued in September and October 2009. Actual results could differ from these estimates.

Prior to the deconsolidation of LEAF, significant estimates specifically for the commercial finance segment included the unguaranteed residual values of leased equipment, servicing liabilities and repurchase obligations, allowance for lease and loan losses, impairment of long-lived assets and goodwill, and the fair values and effectiveness of interest rate swaps.

Investments in Unconsolidated Loan Manager

The Company's interest in CVC Credit Partners and the Company's preferred equity interest in Apidos-CVC is included in Investments in Unconsolidated Loan Manager on the consolidated balance sheets. The Company accounts for its investment in CVC Credit Partners based on the equity method since the Company has the ability to exercise significant influence over the partnership.

The Company accounts for its preferred equity interest in Apidos-CVC on the cost method. As the incentive fees underlying the preferred equity are received, 75% will be distributed to the Company which will initially be recorded as income, net of any contractual amounts due to third-parties. On a quarterly basis, the Company will evaluate the investment for impairment by estimating the fair value of the expected future cash flows from the incentive management fees. If the estimated fair value is less than the cost basis of the preferred shares, the preferred equity interest will be deemed to be impaired. If the Company determines that the shortfall is other-than-temporary, the impairment will be recorded as a reduction of the preferred equity interest by reducing the revenues previously recorded on these preferred shares. To the extent that the investment in preferred equity has been reduced to zero, all subsequent distributions will be recorded as income.

Investments in Unconsolidated Entities

The Company accounts for the investments it has in the real estate, financial fund management and commercial finance investment entities it has sponsored and manages primarily under the equity method of accounting since the Company has the ability to exercise significant influence over the operating and financial decisions of these entities. To the extent that there is a negative balance in the investment for any of these entities, these balances are reclassified to reduce any receivable from such entities. The Company accounts for its investment in Resource Real Estate Opportunity REIT, Inc. (“RRE Opportunity REIT”) on the cost method since the Company owns less than 1% of the shares outstanding. The Company will evaluate these investments for impairment on a quarterly basis. There were no identified events that had a significant adverse effect on these investments and, as such, no impairment was recorded.

Real estate. The Company has sponsored and manages nine real estate limited partnerships, four limited liability companies, a corporation operating as a REIT and six tenant in common (“TIC”) property interest programs that invest in multifamily residential properties.

Financial fund management. In the Financial Fund Management operations, the Company holds the following interests in unconsolidated entities:


•	general and limited partnership interests in seven company-sponsored and managed partnerships that invest in regional bank, and a limited partnership interest in an affiliated partnership organized as a credit opportunities fund that invests in bank loans and high yield bonds; and


•	equity interests in two unconsolidated loan managers that manage trust preferred securities which are held by 13 separate CDOs.

Commercial finance. The Company has interests in four company-sponsored commercial finance investment partnerships.

Concentration of Credit Risk

The Company’s receivables from managed entities are comprised of unsecured amounts due from its investment entities and other affiliated entities, which the Company has sponsored and manages. The Company evaluates the collectability of these receivables and records an allowance to the extent any portion of that receivable is determined to be uncollectible. Additionally, the Company records a discount where it determines that any of the entities will be unable to repay the Company in the near term. In the event that any of these entities fail, the corresponding receivable balance would be at risk.

Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of periodic temporary investments of cash and restricted cash. The Company places its temporary cash investments and restricted cash in high quality short-term money market instruments with high-quality financial institutions and brokerage firms. At September 30, 2012, the Company had $12.0 million (excluding restricted cash) in interest-bearing deposits at various banks, which was over the temporary insurance limit of the Federal Deposit Insurance Corporation of $250,000, or in deposit in foreign banks or in brokerage accounts where no insurance coverage is available. No losses have been experienced on such investments.

Restricted Cash

The Company's restricted cash balance was substantially eliminated with the November 2011 deconsolidation of LEAF. The balance at September 30, 2012 includes $376,000 of escrow deposits for the real estate mortgage and a $250,000 clearing deposit with a third-party broker dealer who serves as a clearing agent for the Company's broker dealer. The $20.3 million balance in restricted cash at September 30, 2011 primarily related to LEAF, which included $10.4 million of customer lockbox payments being processed by the bank as well as $6.9 million of cash held by the lender on the LEAF credit facility pending the pledge of sufficient commercial finance assets as collateral. In addition, the balance at September 30, 2011 included $2.2 million of proceeds from the sale of the Company’s management contract for Resource Europe CLO I (“REM I”) that was subsequently utilized to reduce the Company’s corporate credit facility.

Foreign Currency Translation

Foreign currency transaction gains and losses of the Company’s European operations are recognized in the determination of net income. Foreign currency translation adjustments related to these operations are included in net income.

Revenue Recognition – Fee Income

RSO management fees. The Company earns base management and incentive management fees for managing RSO. In addition, the Company is reimbursed for its expenses incurred on behalf of RSO and its operations and for property management fees. Management fees, property management fees and reimbursed expenses are recognized monthly when earned. In addition, in February 2011, the Company entered into a services agreement with RSO to provide sub-advisory collateral management and administrative services for five CLOs holding approximately $1.7 billion in bank loans. In connection with the sub-advisory services provided, RSO pays CVC Credit Partners 10% of all base and additional collateral management fees and 50% of all incentive collateral management fees it collects.

The quarterly incentive compensation to the Company is payable seventy-five percent (75%) in cash and twenty-five percent (25%) in restricted shares of RSO common stock. The Company may elect to receive more than 25% of its incentive compensation in RSO restricted stock. However, the Company’s ownership percentage in RSO, direct and indirect, cannot exceed 15%. All shares are fully vested upon issuance, provided that the Company may not sell such shares for one year after the incentive compensation becomes due and payable. The restricted stock is valued at the average of the closing prices of RSO common stock over the thirty-day period ending three days prior to the issuance of such shares.

Under a fee agreement, in connection with the April 2012 sale of Apidos to CVC, the Company must remit a portion of the base management fee and incentive compensation it receives from RSO to Apidos-CVC for advisory services in managing the the portfolio of CLOs. The percentage paid to Apidos-CVC is determined by dividing the equity RSO holds in four Apidos CLOs by the calculated equity used to determine the base management fee. Any incentive compensation paid to Apidos-CVC excludes non-recurring items unrelated to Apidos-CVC.

During fiscal 2012, 2011 and 2010, the management, incentive, servicing and acquisition fees that the Company received from RSO were a combined 26%, 14% and 12%, respectively, of the Company’s consolidated revenues. These fees have been allocated and, accordingly, were reported as revenues by each of the Company’s operating segments.

Real estate fees. The Company records acquisition fees of 1% to 2% of the net purchase price of properties acquired by real estate investment entities it sponsors and financing fees equal to 0.5% to 1.75% of the debt obtained or assumed related to the properties acquired. In addition, the company receives debt origination fees which range from 0.5% to 5.0% debt origination fee on the purchase price of real estate debt investments acquired on behalf of real estate investment entities. The Company recognizes these fees when its sponsored entities acquire the properties and obtain the related financing.

The Company records a monthly property management fee equal to 4.5% to 5% of the gross operating revenues from the underlying properties and a monthly debt management fee equal to 0.167% (2% per year) of the gross offering proceeds deployed in debt investments. The Company recognizes these fees monthly when earned.

Additionally, the Company records an annual investment management fee from its limited partnerships equal to 1% of the gross offering proceeds of each partnership. The Company records an annual asset management fee from its TIC programs equal to 1% to 2% of the gross revenues from the properties. These investment management fees and asset management fees are recognized monthly when earned and are discounted to the extent that these fees are not expected to be paid timely.

The Company records quarterly asset management fees from its joint ventures with an institutional partner, which range from 0.833% to 1% per annum of the gross funds invested in distressed real estate loans and assets. The Company recognizes these fees monthly.

Financial fund management fees. The Company earns monthly investment and management fees on assets held in CDOs on behalf of institutional and individual investors. These fees, which vary by CDO, range between 0.10% and 0.35% of the aggregate principal balance of eligible collateral held by the CDOs. These investment management fees and asset management fees are recognized monthly when earned and are discounted to the extent that these fees are deferred. Additionally, the Company records fees for managing the assets held by the partnerships or funds it has sponsored and for managing their general operations. These fees, which vary by limited partnership, range between 0.75% and 2% of the partnership or fund capital balance.

The Company also enters into management or advisory agreements for managing the assets held by third-parties. These fees, which vary by agreement, are recognized monthly when earned.

Introductory agent fees. The Company earns fees for acting as an introducing agent for transactions involving sales of securities of financial services companies, REITs and insurance companies. The Company recognizes these fees monthly when earned.

Commercial finance fees. Prior to the November 2011 deconsolidation of LEAF, the Company recorded acquisition fees from its leasing investment entities (based on a percentage of the cost of the leased equipment acquired) as compensation for expenses incurred by the Company for those acquisitions. The fees, which ranged from 1% to 2%, were earned at the time of the sale of the related leased equipment to the investment entities. The Company also had recorded management fees from its investment entities for managing and servicing the leased assets acquired when the service was performed. The payment of such fees to the Company by each entity is contingent upon the partners receiving specified annual distributions from each entity. During fiscal 2012 , 2011, and 2010 the Company permanently waived $4.7 million, $8.1 million and $3.8 million of management fees from its four investment entities since the distributions to the limited partners were less than the annual specified amounts. The management fees that were waived are not deferrals and accordingly, will not be paid by the commercial finance investment entities. The ability of these entities to pay future management fees is uncertain. A discount is recorded where payment will not be received timely and an allowance is recorded where payment is determined to be uncollectible. Prior to the deconsolidation of LEAF, the Company was paid for the operating and administrative expenses it incurred to manage these entities.

Revenue Recognition – Rental income

Rental revenue is primarily derived from an 86-room boutique hotel in Savannah, Georgia, which is 80% owned by the Company. The Company recognizes the room rental revenue on a daily basis. The Company also derives rental revenue on retail space in the hotel and office space in the office building that the Company owns located in Philadelphia, Pennsylvania. The income from these leases is recognized over the term of the lease as earned. Some of the leases include rent abatements and scheduled rent increases over the lease terms, which are accounted for on a straight-line basis. Tenant reimbursements are recognized in the period that the related costs are incurred. Percentage rent is recognized when the tenant's reported sales have reached certain levels specified in the respective lease.

Stock-Based Compensation

The Company values the restricted stock it issues based on the closing price of its stock on the date of grant. For stock option awards, the Company determines the fair value by applying the Black-Scholes pricing model. These equity awards are amortized to compensation expense over the respective vesting period, less an estimate for forfeitures.

Earnings (Loss) Per Share

Basic earnings (loss) per share (“Basic EPS”) is determined by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period, including participating securities. Diluted earnings (loss) per share (“Diluted EPS”) is computed by dividing net income (loss) by the sum of the weighted average number of shares of common stock outstanding including participating securities, as well as after giving effect to the potential dilution from the exercise of securities, such as stock options and warrants, into shares of common stock as if those securities were exercised.

Financing Receivables

Receivables from Managed Entities. The Company performs a review of the collectability of its receivables from managed entities on a quarterly basis. If upon review there is an indication of impairment, the Company will analyze the future cash flows of the managed entity. With respect to the receivables from its commercial finance investment partnerships, this takes into consideration several assumptions by management, primarily concerning estimations of future bad debts and recoveries. For the receivables from the real estate investment entities for which there are indications of impairment, the Company estimates the cash flows through the sale of the underlying properties, which is based on projected net operating income as a multiple of published capitalization rates, which is then reduced by the underlying mortgage balances and priority distributions due to the investors in the entity.

Investments in Commercial Finance. Prior to the deconsolidation of LEAF in November 2011, the Company’s investments in commercial finance, consisted primarily of direct financing leases, equipment loans, and operating leases.

Direct financing leases. Certain of the Company’s lease transactions were accounted for as direct financing leases (as distinguished from operating leases). Such leases transferred substantially all benefits and risks of equipment ownership to the customer. The Company’s investment in direct financing leases consisted of the sum of the total future minimum contracted payments receivable and the estimated unguaranteed residual value of leased equipment, less unearned finance income. Unearned finance income, which was recognized as revenue over the term of the financing by the effective interest method, represented the excess of the total future minimum lease payments plus the estimated unguaranteed residual value expected to be realized at the end of the lease term over the cost of the related equipment. Initial direct costs incurred in the consummation of the lease were capitalized as part of the investment in lease receivables and amortized over the lease term as a reduction of the yield. The Company discontinued recognizing revenue for leases and loans for which payments were more than 90 days past due. Fees from delinquent payments were recognized when received.

Equipment loans. For term loans, the investment consisted of the sum of the total future minimum loan payments receivable less unearned finance income. Unearned finance income, which was recognized as revenue over the term of the financing by the effective interest method, represented the excess of the total future minimum contracted payments over the original cost of the loan. For all other loans, interest income was recorded at the stated rate on the accrual basis to the extent that such amounts were expected to be collected.

Operating leases. Leases not meeting any of the criteria to be classified as direct financing leases were deemed to be operating leases. The cost of the leased equipment, including acquisition fees associated with lease placements, was recorded as an asset and depreciated on a straight-line basis over the equipment’s estimated useful life, generally up to seven years. Rental income consisted primarily of monthly periodic rental payments due under the terms of the leases. The Company recognized rental income on a straight-line basis.

During the lease term of operating leases, the Company was prepared to remarket the equipment to the extent it was not able to recover the related cost and expenses of the equipment. The Company’s policy was to review, on at least a quarterly basis, the expected economic life of its rental equipment in order to determine the recoverability of its undepreciated cost. The Company would write down its rental equipment to its estimated net realizable value when it is probable that its carrying amount exceeded such value and the excess could be reasonably estimated; gains were only recognized upon actual sale of the rental equipment. There were no write-downs of equipment during fiscal 2012, 2011, or 2010.

Future payment card receivables. Additionally, the Company had provided capital advances to small businesses based on future credit card receipts. The entire portfolio of future payment card receivables was on the cost recovery method whereby no income was recognized until the basis of the future payment card receivable had been fully recovered.

Allowance for credit losses. The Company evaluated the adequacy of the allowance for credit losses in commercial finance (including investments in leases and loans and future payment card receivables) based upon, among other factors, management’s historical experience with the commercial finance portfolios it managed, an analysis of contractual delinquencies, economic conditions and trends, industry statistics and equipment finance portfolio characteristics, as adjusted for expected recoveries. In evaluating historic performance of leases and loans, the Company performed a migration analysis, which estimates the likelihood that an account progressed through delinquency stages to ultimate write-off. The Company fully reserved, net of recoveries, all leases and loans after they were 180 days past due.

Loans

Real estate loans. Real estate loans that management has the intent and ability to hold for the foreseeable future, or until maturity or payoff, are stated at the amount of unpaid principal, reduced by unearned income and an allowance for credit losses, if necessary. These loans are included in Investments in Real Estate in the consolidated balance sheets. Interest on these loans is calculated based upon the principal amount outstanding. Accrual of interest is stopped on a loan when management believes, after considering economic factors, business conditions and collection efforts that the borrower’s financial condition is such that collection of interest is doubtful.

An impaired real estate loan may remain on accrual status during the period in which the Company is pursuing repayment of the loan; however, the loan is placed on non-accrual status at such time as (i) management believes that contractual debt service payments will not be met; or (ii) the loan becomes 90 days delinquent; and (iii) management determines the borrower is incapable of, or has ceased efforts toward, curing the cause of the impairment. While on non-accrual status, the Company recognizes interest income only when an actual payment is received. Loans are charged off after being on non-accrual for a period of one year.

The Company maintains an allowance for credit losses for real estate loans at a level deemed sufficient to absorb probable losses. The Company considers general and local economic conditions, neighborhood values, competitive overbuilding, casualty losses and other factors that may affect the value of real estate loans. The value of loans and real estate may also be affected by factors such as the cost of compliance with regulations and liability under applicable environmental laws, changes in interest rates and the availability of financing. Income from a property will be reduced if a significant number of tenants are unable to pay rent or if available space cannot be rented on favorable terms. In addition, the Company reviews all credits on a quarterly basis and continually monitors collections and payments from its borrowers and maintains an allowance for credit losses based upon its historical experience and its knowledge of specific borrower collection issues. The Company reduces its investments in real estate loans and real estate by an allowance for amounts that may become unrealizable in the future.

Investment Securities

The Company’s investment securities available-for-sale, including investments in the CLO issuers it sponsored, are carried at fair value. The fair value of the CLO investments is based primarily on internally-generated expected cash flow models that require significant management judgment and estimates due to the lack of market activity and the use of unobservable pricing inputs. Investments in affiliated entities, including holdings in The Bancorp, Inc. (“TBBK”) (NASDAQ: TBBK) and RSO, are valued at the closing price of the respective publicly-traded stock. The fair value of the cumulative net unrealized gains and losses on these investment securities, net of tax, is reported through accumulated other comprehensive income and loss. Realized gains and losses on the sale of investments are determined on the trade date on the basis of specific identification and are included in net operating results.

The Company recognizes a realized loss when it is probable there has been an adverse change in estimated cash flows of the security holder from what had been previously estimated. The security is then written down to fair value, and the unrealized loss is transferred from accumulated other comprehensive loss to the consolidated statements of operations as a charge to current earnings. The cost basis adjustment for an other-than-temporary impairment would be recoverable only upon the sale or maturity of the security.

Periodically, the Company reviews the carrying value of its available-for-sale securities. If the Company deems an unrealized loss to be other-than-temporary, it will record an impairment charge. The Company’s process for identifying other-than-temporary declines in the fair value of its investments involves consideration of (i) the duration of a significant decline in value, (ii) the liquidity, business prospects and overall financial condition of the issuer, (iii) the magnitude of the decline, (iv) the collateral structure and other credit support, as applicable, and (v) the more-than-likely intention of the Company to hold the investment until the value recovers. With respect to its evaluation of its investment in RSO, the Company also takes into consideration its role as the external manager and the value of its management contract, which includes a substantial termination fee. When the analysis of the above factors results in a conclusion that a decline in fair value is other-than-temporary, an impairment charge is recorded and the cost of the investment is written down to fair value.

The Company purchased investment securities classified as trading during fiscal 2012. Trading securities are recorded at fair value with unrealized holding gains and losses reported in revenues by operating segment. The Company utilizes trade date accounting to record the purchases and sales of trading securities. The cost of a security is determined using the specific identification method. Earnings from trading securities, primarily reported net, are comprised of realized and unrealized gains and losses from sales of trading securities, mark to market adjustments to fair value, gains and losses related to foreign currency commissions from riskless principal trades, and gains and losses from other security transactions, if any. The Company utilizes third-party dealer quotes or bids and recent transactions to estimate the fair value of these securities. In fiscal 2011, the Company held shares of TBBK common stock in a benefit plan for a former executive (see Note 20). The shares, which were also classified as trading, were valued at the closing price of the stock with unrealized gains and losses included in Other Income in the consolidated statements of operations.

The Company recognizes dividend income on its investment securities classified as available-for-sale on the ex-dividend date.

Property and Equipment

Property and equipment, which includes amounts recorded under capital leases, are stated at cost. Depreciation and amortization are based on cost, less estimated salvage value, using the straight-line method over the asset’s estimated useful life. Maintenance and repairs are expensed as incurred. Major renewals and improvements that extend the useful lives of property and equipment are capitalized. The amortization of assets classified under capital leases is included in depreciation and amortization expense.

Accounting for Income Taxes

The objectives of accounting for income taxes are to recognize the amount of taxes payable or refundable for the current year and to recognize deferred tax liabilities and assets for the future tax consequences of events that have been recognized in the Company’s consolidated financial statements or tax returns.

The Company adjusts the balance of its deferred taxes to reflect the tax rates at which future taxable amounts will likely be settled or realized. The effects of tax rate changes on deferred tax liabilities and deferred tax assets, as well as other changes in income tax laws, are recognized in net earnings in the period during which such changes are enacted. Valuation allowances are established and adjusted, when necessary, to reduce deferred tax assets to the amounts expected to be realized. The Company assesses its ability to realize deferred tax assets primarily based on tax planning strategies.

A tax position should only be recognized if it is more likely than not that the position will be sustained upon examination by the appropriate taxing authority. A tax position that meets this threshold is measured as the largest amount of benefit that is greater than 0 percent likely of being realized upon ultimate settlement. The Company classifies any tax penalties as general and administrative expenses and any interest as interest expense. The Company does not have any unrecognized tax benefits that would affect the effective tax rate.

Servicing and Repurchase Liabilities

Prior to its deconsolidation, LEAF had routinely sold its investments in commercial finance assets to its affiliated leasing partnerships and RSO, as well as to third-parties. Leases and loans were accounted for as sold when control of the lease was surrendered. Control over the leases was deemed surrendered when (1) the leases had been transferred to the leasing partnership, RSO or third-party, (2) the buyer had the right (free of conditions that constrained it from taking advantage of that right) to pledge or exchange the leases and (3) the Company no longer maintained effective control over the leases through either (a) an agreement that entitled and obligated the Company to repurchase or redeem the leases before maturity, or (b) the ability to unilaterally cause the buyer to return specific leases. Subsequent to these sales, the Company typically remained as the servicer for the leases and loans sold for which it generally received a servicing fee of approximately 1% of the book value of the serviced portfolio. The assets and liabilities associated with the respective servicing agreements were typically not material and were offsetting, and accordingly, were not reflected in the Company’s consolidated financial statements. However, during fiscal 2010, LEAF Financial sold a portfolio of leases and loans to RSO for which it recorded a $2.5 million liability for the estimated cost to service the portfolio. In conjunction with the formation of LEAF in January 2011, the remaining balance of this servicing and repurchase liability was eliminated and, accordingly, the Company recognized a gain of $4.4 million.

Goodwill and Intangible Assets

Prior to the deconsolidation of LEAF, goodwill and other intangible assets with an indefinite life were not amortized. Instead, a review for impairment was performed at least annually or more frequently if events and circumstances indicated impairment might have occurred. The Company tested its goodwill at the reporting unit level using a two-step process. The first step was a screen for potential impairment by comparing the fair value of a reporting unit to its carrying value. If the fair value of a reporting unit exceeded the carrying value of the net assets assigned to a reporting unit, goodwill was considered not impaired and no further testing was required. If the fair value was less than the carrying value, step two was completed to measure the amount of impairment, if any. No impairment charges was recognized on the goodwill.

The Company utilized several approaches, including discounted expected cash flows, market data and comparable sales transactions to estimate the fair value of its reporting unit for its impairment review of goodwill. Those approaches required assumptions and estimates of many critical factors, including revenue and market growth, operating cash flows, market multiples, and discount rates, which were based on the existing economic environment and credit market conditions.

In the January 2011 formation of LEAF, the $8.0 million balance of goodwill was transferred from LEAF Financial to LEAF and, as a result of the November 2011 LEAF Transaction, was deconsolidated from the Company's balance sheets.

Long-lived assets and identifiable intangibles with finite lives were reviewed for impairment whenever events or changes in circumstances indicated that the carrying amount of the asset may not be recoverable. Recoverability of assets to be held and used was measured by a comparison of the carrying amount of the asset to future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment recognized was measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of were reported at the lower of the carrying amount or fair value less costs to sell.

In fiscal 2007, the Company acquired customer relationships with third-party lease originators, which it classified as a customer related intangible asset. The Company amortized this intangible asset over its expected useful life and monitored it for recoverability. During fiscal 2010, the Company determined that this asset ceased to have future value and, accordingly, recorded a $2.8 million impairment loss for the remaining unamortized balance.

Derivative Instruments

As a result of the November 2011 LEAF Transaction, the derivative contracts held by LEAF were deconsolidated from the Company's consolidated balance sheets.

Historically, LEAF entered into derivative contracts, including interest rate swaps, to add stability to its financing costs and to manage its exposure to interest rate movements or other identified risks, which it designated as cash flow hedges. The contracts or hedge instruments were evaluated at inception and at subsequent balance sheet dates to determine if they continued to qualify for hedge accounting and, accordingly, derivatives were recognized on the consolidated balance sheets at fair value, as either assets or liabilities. Changes in the estimated fair value of these derivatives were reflected in Accumulated Other Comprehensive Income (Loss) to the extent that it was effective. Any ineffective portion of a derivative’s change in fair value was recognized in earnings.

Before it entered into a derivative transaction for hedging purposes, LEAF would determine whether a high degree of initial effectiveness existed between the change in the value of the hedged forecasted transaction and the change in the value of the derivative from a movement in interest rates. LEAF measured the effectiveness of each cash flow hedge throughout the hedge period. Any hedge ineffectiveness on cash flow hedging relationships was recognized in earnings.

Recent Accounting Standards

Accounting Standard Issued But Not Yet Effective

The Financial Accounting Standards Board (“FASB”) issued the following accounting standard which was not yet effective for the Company as of September 30, 2012:

Comprehensive income (loss). In June 2011, the FASB issued an amendment to eliminate the option to present components of other comprehensive income (loss) as part of the statement of changes in stockholders' equity. The amendment requires that all non-owner changes in stockholders' equity be presented either in a single continuous statement of comprehensive income (loss) or in two separate but consecutive statements. In the two-statement approach, the first statement should present total net income (loss) and its components followed consecutively by a second statement that should present total other comprehensive income (loss), the components of other comprehensive income (loss), and the total of comprehensive income (loss). In December 2011, the FASB updated the guidance to defer the requirement related to the presentation of reclassification adjustments. The Company plans to provide the disclosures required by this amendment beginning October 1, 2012.

Newly-Adopted Accounting Principle

The Company’s adoption of the following standard during fiscal 2012 did not have a material impact on its consolidated financial position, results of operations or cash flows:

Fair value measurements. In May 2011, the FASB issued an amendment to revise the wording used to describe the requirements for measuring fair value and for disclosing information about fair value measurements. For many of the requirements, the FASB did not intend for the amendments to result in a change in the application of the current requirements. Some of the amendments clarify the FASB's intent about the application of existing fair value measurement requirements, such as specifying that the concepts of highest and best use and valuation premise in a fair value measurement are relevant only when measuring the fair value of nonfinancial assets. Other amendments change a particular principle or requirement for measuring fair value or for disclosing information about fair value measurements such as specifying that, in the absence of a Level 1 input, a reporting entity should apply premiums or discounts when market participants would do so when pricing the asset or liability. This guidance became effective for the Company beginning January 1, 2012 and, accordingly, the Company has presented the required disclosures (see Note 23).