SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES	12 Months Ended
Sep. 30, 2011
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract]
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES	NOTE 2 - 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. This assessment must be done on an ongoing basis. 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, 2011 and 2010, the Company had one such variable interest that it consolidated. The Company will continually assess its involvement with VIEs and reevaluate the requirement to consolidate them. 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 2010 and 2009 consolidated financial statements to conform to the fiscal 2011 presentation. For all years presented, deferred tax liabilities, which were previously disclosed separately, have been reclassed and are reflected together with deferred tax assets in the consolidated balance sheets. The components of the deferred tax assets and liabilities are disclosed in Note 17. Deconsolidation of Entities Apidos CDO VI. In December 2007, the Company acquired for $21.3 million all of the equity interest of Apidos CDO VI and consolidated it. In March 2009, the Company agreed to all the terms and conditions to sell its interest in Apidos CDO VI and assign its investment management responsibilities to the buyer. This transaction settled on May 6, 2009. As a result of the agreement and sale, the Company deconsolidated Apidos CDO VI from its consolidated financial statements as of March 31, 2009 and recognized a loss of $11.6 million on the transaction. LEAF Commercial Finance Fund (“LCFF”). LCFF was a single member limited liability company that owned a portfolio of leases and loans. LEAF Financial was the sole member and the managing member of LCFF and, accordingly, consolidated LCFF. In March 2009, the Company transferred its economic interest in LCFF to a jointly owned limited liability company. The Company determined that LCFF was a VIE for which the primary beneficiary was the limited liability company and, accordingly, no longer consolidates LCFF. Since the sale was at book value, the Company recognized no gain or loss as a result of the transaction. 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, servicing liability and repurchase obligation, allowance for lease and loan losses, and in determining whether a decrease in the fair value of an investment is an other-than-temporary impairment. Significant estimates for the commercial finance segment include the unguaranteed residual values of leased equipment, impairment of long-lived assets and goodwill and the fair value and effectiveness of interest rate swaps. The financial fund management segment makes assumptions in determining the fair value of its investments in securities available-for-sale 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 12% senior notes and warrants that it issued and sold in September and October 2009. Actual results could differ from these estimates. Investments in Unconsolidated Entities The Company accounts for the investments it has in the real estate, commercial finance and financial fund management investment entities it has sponsored and manages 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 the receivable from such entities. Real estate. The Company has sponsored and manages eight 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. The Company's combined interests in these investment entities range from approximately 2% to 10%. Financial fund management. The Company has general and limited partnership interests in seven company-sponsored and managed partnerships that invest in regional banks. The Company's combined general and limited partnership interests in these partnerships range from 5% to 11%. The Company also manages and has a combined 3% general and limited partnership interest in an affiliated partnership organized as a credit opportunities fund that invests in bank loans and high yield bonds. Commercial finance. The Company has interests in four company-sponsored commercial finance investment partnerships. The Company's combined general and limited partner interests in these partnerships range from approximately 1% to 6%. 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. In addition, 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, 2011, the Company had $14.1 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 restricted cash at September 30, 2011 of $20.3 million primarily included $10.4 million of payments made by LEAF customers to a lockbox which were being processed by the bank as well as $6.9 million held in a prefunding account comprised of proceeds from the commercial finance credit facility which are restricted from use until sufficient commercial finance leases and loans have been originated to be pledged as collateral. In addition, at September 30, 2011, there was $2.2 million of proceeds from the sale of the Company's management contract for Resource Europe CLO I (“REM I”) held in restricted cash for the required October 2011 paydown of the Company's corporate credit facility. Restricted cash at September 30, 2010 of $12.0 million primarily included $10.1 million of proceeds from the $21.5 million commercial finance bridge loan held for the purchase of leases and loans and $1.4 million held in escrow for a real estate property investment. 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 foreign operations are included in net income in fiscal 2011 due the sale of the Company's management contract and interest in REM I. Revenue Recognition – Fee Income RCC management fees. The Company earns a base management and incentive management fee for managing RCC (see Note 20). In addition, the Company is reimbursed for its expenses incurred on behalf of RCC and its operations and 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 RCC to provide subadvisory collateral management and administrative services for five CDOs holding approximately $1.7 billion in bank loans. In connection with the services provided, RCC will pay the Company 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 RCC common stock. The Company may elect to receive more than 25% of its incentive compensation in RCC restricted stock. However, the Company's ownership percentage in RCC, 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 RCC common stock over the thirty-day period ending three days prior to the issuance of such shares. In fiscal 2011, 2010 and 2009, the management, incentive, servicing and acquisition fees that the Company received from RCC were 14%, 12% and 8%, respectively, of the Company's consolidated revenues. These fees have been allocated and, accordingly, are 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 5.0% of the debt obtained or assumed related to the properties acquired. 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 deferred. The Company records quarterly asset management fees from its joint ventures with an institutional partner, which range from 0.833% to 1% 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 0.05% and 0.5% 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. The Company records 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 related to the lease acquisition. Acquisition fees, which range from 1% to 2%, are earned at the time of the sale of the related leased equipment to the investment entities. The Company also records management fees from its investment entities for managing and servicing the leased assets acquired when the service is performed. The payment of such fees to the Company by each entity is contingent upon the partners receiving their specified annual distributions by each entity. During fiscal 2011 and 2010, the Company waived $8.1 million and $3.8 million of management fees from four of its investment entities since the actual distributions to the partners were less than the annual specified amounts. 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. However, the Company is paid for the operating and administrative expenses it incurs to manage these entities. 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 periodic 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, specifically 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. The Company's investments in commercial finance consist primarily of direct financing leases, equipment loans, and operating leases. Direct financing leases. Certain of the Company's lease transactions are accounted for as direct financing leases (as distinguished from operating leases). Such leases transfer substantially all benefits and risks of equipment ownership to the customer. The Company's investment in direct financing leases consists 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 is recognized as revenue over the term of the financing by the effective interest method, represents 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 are capitalized as part of the investment in lease receivables and amortized over the lease term as a reduction of the yield. The Company discontinues recognizing revenue for lease and loans for which payments are more than 90 days past due. Fees from delinquent payments are recognized when received. Equipment loans. For term loans, the investment consists of the sum of the total future minimum loan payments receivable less unearned finance income. Unearned finance income, which is recognized as revenue over the term of the financing by the effective interest method, represents the excess of the total future minimum contracted payments over the original cost of the loan. For all other loans, interest income is recorded at the stated rate on the accrual basis to the extent that such amounts are expected to be collected. Operating leases. Leases not meeting any of the criteria to be classified as direct financing leases are deemed to be operating leases. Under the accounting for operating leases, the cost of the leased equipment, including acquisition fees associated with lease placements, is 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 consists primarily of monthly periodic rental payments due under the terms of the leases. The Company recognizes rental income on a straight-line basis. During the lease term of existing operating leases, the Company may not recover all of the cost and related expenses of its rental equipment and, therefore, it is prepared to remarket the equipment in future years. The Company's policy is 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 writes down its rental equipment to its estimated net realizable value when it is probable that its carrying amount exceeds such value and the excess can be reasonably estimated; gains are only recognized upon actual sale of the rental equipment. There were no write-downs of equipment during fiscal 2011, 2010, and 2009. Future payment card receivables. Additionally, the Company has provided capital advances to small businesses based on future credit card receipts. The entire portfolio of future payment card receivables is on the cost recovery method whereby no income is recognized until the basis of the future payment card receivable has been fully recovered. Allowance for credit losses. The Company evaluates 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 manages, 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 performs a migration analysis, which estimates the likelihood that an account progresses through delinquency stages to ultimate write-off. The Company fully reserves, net of recoveries, all leases and loans after they are 180 days past due. Commercial finance receivables whose terms are modified are classified as troubled debt restructurings if the Company grants such borrowers concessions and it is deemed that those borrowers are experiencing financial difficulty. Concessions granted under a troubled debt restructuring typically involve a temporary deferral of scheduled payments, an extension of a commercial financial receivable's stated maturity date or a reduction in its interest rate. Non-accrual troubled debt restructurings can be restored to accrual status if principal and interest payments, under the modified terms, become current subsequent to the modification. Troubled debt restructurings are included in the Company's migration analysis for its commercial finance investments when evaluating the allowance for credit losses. 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 CDO issuers it sponsored, are carried at fair value. The fair value of the CDO 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 RCC, 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. Additionally, with respect to its evaluation of its investment in RCC, 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's trading securities are recorded at fair value with unrealized holding gains and losses included in earnings and reported in other income. These securities are valued at the closing price of the respective publicly-traded stock. 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 the earnings history and future earnings potential of the legal entities through which the deferred tax assets will be realized. Servicing and Repurchase Liabilities The Company routinely has sold its investments in commercial finance assets to its affiliated leasing partnerships and RCC, as well as to third parties. Leases and loans are accounted for as sold when control of the lease is surrendered. Control over the leases is deemed surrendered when (1) the leases have been transferred to the leasing partnership, RCC or third party, (2) the buyer has the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the leases and (3) the Company does not maintain effective control over the leases through either (a) an agreement that entitles and obligates 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 remains as the servicer for the leases and loans sold for which it generally receives a servicing fee of approximately 1% of the book value of the serviced portfolio. The assets and liabilities associated with the respective servicing agreements are typically not material and are offsetting, and accordingly, are not reflected in the Company's consolidated financial statements. However, during fiscal 2010, LEAF Financial sold a portfolio of leases and loans to RCC 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 the servicing and repurchase liabilities was eliminated and, accordingly, the Company recognized a gain of $4.4 million. Goodwill and Intangible Assets Goodwill and other intangible assets have an indefinite life and are not amortized. Instead, a review for impairment is performed at least annually or more frequently if events and circumstances indicate impairment might have occurred. The Company tests its goodwill at the reporting unit level using a two-step process. The first step is 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 exceeds the carrying value of the net assets assigned to a reporting unit, goodwill is considered not impaired and no further testing is required. If the fair value is less than the carrying value, step two is completed to measure the amount of impairment, if any. In step two, the implied fair value of goodwill is compared to its carrying amount. The implied fair value of goodwill is computed by subtracting the sum of the fair values of the individual asset categories (tangible and intangible) from the indicated fair value of the reporting unit as determined under step one. An impairment charge is recognized to the extent that the carrying amount of goodwill exceeds its implied fair value. The Company utilizes 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. These approaches require assumptions and estimates of many critical factors, including revenue and market growth, operating cash flows, market multiples, and discount rates, which are based on the current economic environment and credit market conditions. In the January 2011 transaction, the $8.0 million balance of goodwill was transferred from LEAF Financial to LEAF. The Company tests this goodwill annually on May 31st for impairment. Based on a third-party valuation, the Company concluded that, as of May 31, 2011, there has been no impairment of goodwill. As a result of the deconsolidation of LEAF (see Note 27) subsequent to fiscal 2011, the Company will no longer reflect this goodwill on its consolidated balance sheets. Long-lived assets and identifiable intangibles with finite lives are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an 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 is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are 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 The Company's policies permit it to enter 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. The Company has designed these transactions as cash flow hedges. The contracts or hedge instruments are evaluated at inception and at subsequent balance sheet dates to determine if they continue to qualify for hedge accounting and, accordingly, derivatives are recognized on the balance sheet at fair value. U.S. GAAP requires recognition of all derivatives at fair value as either assets or liabilities in the consolidated balance sheets. The Company records changes in the estimated fair value of the derivative in accumulated other comprehensive income (loss) to the extent that it is effective. Any ineffective portion of a derivative's change in fair value will be immediately recognized in earnings. Before entering into a derivative transaction for hedging purposes, the Company determines whether a high degree of initial effectiveness exists 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. High effectiveness means that the change in the value of the derivative is expected to provide a high degree of offset against changes in the value of the hedged forecasted transactions caused by changes in interest rate risk. The Company measures the effectiveness of each cash flow hedge throughout the hedge period. Any hedge ineffectiveness on cash flow hedging relationships, as defined by U.S. GAAP, will be recognized in the consolidated statements of operations. There can be no assurance that the Company's hedging strategies or techniques will be effective, that profitability will not be adversely affected during any period of change in interest rates, or that the costs of hedging will not exceed the benefits. Recent Accounting Standards Accounting Standards Issued But Not Yet Effective The Financial Accounting Standards Board (“FASB”) has issued the following accounting standards, which were not yet effective for the Company as of September 30, 2011: Testing goodwill for impairment. In December 2010 and again in September 2011, the FASB issued guidance with respect to testing goodwill for impairment. In connection with the November 2011 LCC Transaction (see Note 27) and resulting deconsolidation of LEAF, the Company will no longer reflect goodwill on its balance sheet. Accordingly, these amendments will not have an impact on the Company's financial statements. 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). The Company plans to provide the disclosures as required by this amendment beginning October 1, 2012. 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 does 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 will become effective for the Company beginning January 1, 2012. The Company is currently evaluating the impact this amendment will have, if any, on its financial statements. Newly-Adopted Accounting Principles The Company's adoption of the following standards during fiscal 2011 did not have a material impact on its consolidated financial position, results of operations or cash flows: Troubled debt restructurings. In fiscal 2010, the FASB issued guidance that requires the disclosure of more detailed information on the nature and extent of troubled debt restructurings and their effect on the allowance for loan and lease losses. In April 2011, the FASB issued additional guidance related to determining whether a creditor has granted a concession, including factors and examples for creditors to consider in evaluating whether a restructuring results in a delay in payment that is insignificant, prohibits creditors from using the borrower's effective rate test to evaluate whether a concession has been granted to the borrower, and adds factors for creditors to use in determining whether a borrower is experiencing financial difficulties. Transfers of financial assets. In June 2009, the FASB amended prior guidance on accounting for transfers of financial assets. The new pronouncement changes the derecognition guidance for the transferors of financial assets, eliminates the exemption from consolidation for qualifying special-purpose entities and requires additional disclosures about all transfers of financial assets. Disclosure about the credit quality of financing receivables and the allowance for credit losses. In July 2010, the FASB issued guidance that requires companies to provide more information about the credit quality of their financing receivables including, but not limited to, significant purchases and sales of financing receivables, aging information and credit quality indicators. The Company has provided the required disclosures in the notes to these consolidated financial statements. Variable interest entities. In June 2009, the FASB issued guidance to revise the approach to determine when a VIE should be consolidated. The new consolidation model for VIEs considers whether the company has the power to direct the activities that most significantly impact the VIE's economic performance and shares in the significant risks and rewards of the entity. The guidance on VIEs requires companies to continually reassess VIEs to determine if consolidation is appropriate and to provide additional disclosures.

NOTE 2 - 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. This assessment must be done on an ongoing basis. 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, 2011 and 2010, the Company had one such variable interest that it consolidated. The Company will continually assess its involvement with VIEs and reevaluate the requirement to consolidate them. 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 2010 and 2009 consolidated financial statements to conform to the fiscal 2011 presentation. For all years presented, deferred tax liabilities, which were previously disclosed separately, have been reclassed and are reflected together with deferred tax assets in the consolidated balance sheets. The components of the deferred tax assets and liabilities are disclosed in Note 17.

Deconsolidation of Entities

Apidos CDO VI. In December 2007, the Company acquired for $21.3 million all of the equity interest of Apidos CDO VI and consolidated it. In March 2009, the Company agreed to all the terms and conditions to sell its interest in Apidos CDO VI and assign its investment management responsibilities to the buyer. This transaction settled on May 6, 2009. As a result of the agreement and sale, the Company deconsolidated Apidos CDO VI from its consolidated financial statements as of March 31, 2009 and recognized a loss of $11.6 million on the transaction.

LEAF Commercial Finance Fund (“LCFF”). LCFF was a single member limited liability company that owned a portfolio of leases and loans. LEAF Financial was the sole member and the managing member of LCFF and, accordingly, consolidated LCFF. In March 2009, the Company transferred its economic interest in LCFF to a jointly owned limited liability company. The Company determined that LCFF was a VIE for which the primary beneficiary was the limited liability company and, accordingly, no longer consolidates LCFF. Since the sale was at book value, the Company recognized no gain or loss as a result of the transaction.

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, servicing liability and repurchase obligation, allowance for lease and loan losses, and in determining whether a decrease in the fair value of an investment is an other-than-temporary impairment. Significant estimates for the commercial finance segment include the unguaranteed residual values of leased equipment, impairment of long-lived assets and goodwill and the fair value and effectiveness of interest rate swaps. The financial fund management segment makes assumptions in determining the fair value of its investments in securities available-for-sale 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 12% senior notes and warrants that it issued and sold in September and October 2009. Actual results could differ from these estimates.

Investments in Unconsolidated Entities

The Company accounts for the investments it has in the real estate, commercial finance and financial fund management investment entities it has sponsored and manages 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 the receivable from such entities.

Real estate. The Company has sponsored and manages eight 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. The Company's combined interests in these investment entities range from approximately 2% to 10%.

Financial fund management. The Company has general and limited partnership interests in seven company-sponsored and managed partnerships that invest in regional banks. The Company's combined general and limited partnership interests in these partnerships range from 5% to 11%. The Company also manages and has a combined 3% general and limited partnership interest in an affiliated partnership organized as a credit opportunities fund that invests in bank loans and high yield bonds.

Commercial finance. The Company has interests in four company-sponsored commercial finance investment partnerships. The Company's combined general and limited partner interests in these partnerships range from approximately 1% to 6%.

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.

In addition, 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, 2011, the Company had $14.1 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 restricted cash at September 30, 2011 of $20.3 million primarily included $10.4 million of payments made by LEAF customers to a lockbox which were being processed by the bank as well as $6.9 million held in a prefunding account comprised of proceeds from the commercial finance credit facility which are restricted from use until sufficient commercial finance leases and loans have been originated to be pledged as collateral. In addition, at September 30, 2011, there was $2.2 million of proceeds from the sale of the Company's management contract for Resource Europe CLO I (“REM I”) held in restricted cash for the required October 2011 paydown of the Company's corporate credit facility. Restricted cash at September 30, 2010 of $12.0 million primarily included $10.1 million of proceeds from the $21.5 million commercial finance bridge loan held for the purchase of leases and loans and $1.4 million held in escrow for a real estate property investment.

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 foreign operations are included in net income in fiscal 2011 due the sale of the Company's management contract and interest in REM I.

Revenue Recognition – Fee Income

RCC management fees. The Company earns a base management and incentive management fee for managing RCC (see Note 20). In addition, the Company is reimbursed for its expenses incurred on behalf of RCC and its operations and 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 RCC to provide subadvisory collateral management and administrative services for five CDOs holding approximately $1.7 billion in bank loans. In connection with the services provided, RCC will pay the Company 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 RCC common stock. The Company may elect to receive more than 25% of its incentive compensation in RCC restricted stock. However, the Company's ownership percentage in RCC, 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 RCC common stock over the thirty-day period ending three days prior to the issuance of such shares.

In fiscal 2011, 2010 and 2009, the management, incentive, servicing and acquisition fees that the Company received from RCC were 14%, 12% and 8%, respectively, of the Company's consolidated revenues. These fees have been allocated and, accordingly, are 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 5.0% of the debt obtained or assumed related to the properties acquired. 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 deferred.

The Company records quarterly asset management fees from its joint ventures with an institutional partner, which range from 0.833% to 1% 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 0.05% and 0.5% 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. The Company records 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 related to the lease acquisition. Acquisition fees, which range from 1% to 2%, are earned at the time of the sale of the related leased equipment to the investment entities. The Company also records management fees from its investment entities for managing and servicing the leased assets acquired when the service is performed. The payment of such fees to the Company by each entity is contingent upon the partners receiving their specified annual distributions by each entity. During fiscal 2011 and 2010, the Company waived $8.1 million and $3.8 million of management fees from four of its investment entities since the actual distributions to the partners were less than the annual specified amounts. 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. However, the Company is paid for the operating and administrative expenses it incurs to manage these entities.

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 periodic 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, specifically 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. The Company's investments in commercial finance consist primarily of direct financing leases, equipment loans, and operating leases.

Direct financing leases. Certain of the Company's lease transactions are accounted for as direct financing leases (as distinguished from operating leases). Such leases transfer substantially all benefits and risks of equipment ownership to the customer. The Company's investment in direct financing leases consists 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 is recognized as revenue over the term of the financing by the effective interest method, represents 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 are capitalized as part of the investment in lease receivables and amortized over the lease term as a reduction of the yield. The Company discontinues recognizing revenue for lease and loans for which payments are more than 90 days past due. Fees from delinquent payments are recognized when received.

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

Operating leases. Leases not meeting any of the criteria to be classified as direct financing leases are deemed to be operating leases. Under the accounting for operating leases, the cost of the leased equipment, including acquisition fees associated with lease placements, is 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 consists primarily of monthly periodic rental payments due under the terms of the leases. The Company recognizes rental income on a straight-line basis.

During the lease term of existing operating leases, the Company may not recover all of the cost and related expenses of its rental equipment and, therefore, it is prepared to remarket the equipment in future years. The Company's policy is 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 writes down its rental equipment to its estimated net realizable value when it is probable that its carrying amount exceeds such value and the excess can be reasonably estimated; gains are only recognized upon actual sale of the rental equipment. There were no write-downs of equipment during fiscal 2011, 2010, and 2009.

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

Allowance for credit losses. The Company evaluates 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 manages, 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 performs a migration analysis, which estimates the likelihood that an account progresses through delinquency stages to ultimate write-off. The Company fully reserves, net of recoveries, all leases and loans after they are 180 days past due.

Commercial finance receivables whose terms are modified are classified as troubled debt restructurings if the Company grants such borrowers concessions and it is deemed that those borrowers are experiencing financial difficulty. Concessions granted under a troubled debt restructuring typically involve a temporary deferral of scheduled payments, an extension of a commercial financial receivable's stated maturity date or a reduction in its interest rate. Non-accrual troubled debt restructurings can be restored to accrual status if principal and interest payments, under the modified terms, become current subsequent to the modification. Troubled debt restructurings are included in the Company's migration analysis for its commercial finance investments when evaluating the allowance for credit losses.

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 CDO issuers it sponsored, are carried at fair value. The fair value of the CDO 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 RCC, 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. Additionally, with respect to its evaluation of its investment in RCC, 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's trading securities are recorded at fair value with unrealized holding gains and losses included in earnings and reported in other income. These securities are valued at the closing price of the respective publicly-traded stock.

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 the earnings history and future earnings potential of the legal entities through which the deferred tax assets will be realized.

Servicing and Repurchase Liabilities

The Company routinely has sold its investments in commercial finance assets to its affiliated leasing partnerships and RCC, as well as to third parties. Leases and loans are accounted for as sold when control of the lease is surrendered. Control over the leases is deemed surrendered when (1) the leases have been transferred to the leasing partnership, RCC or third party, (2) the buyer has the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the leases and (3) the Company does not maintain effective control over the leases through either (a) an agreement that entitles and obligates 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 remains as the servicer for the leases and loans sold for which it generally receives a servicing fee of approximately 1% of the book value of the serviced portfolio. The assets and liabilities associated with the respective servicing agreements are typically not material and are offsetting, and accordingly, are not reflected in the Company's consolidated financial statements. However, during fiscal 2010, LEAF Financial sold a portfolio of leases and loans to RCC 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 the servicing and repurchase liabilities was eliminated and, accordingly, the Company recognized a gain of $4.4 million.

Goodwill and Intangible Assets

Goodwill and other intangible assets have an indefinite life and are not amortized. Instead, a review for impairment is performed at least annually or more frequently if events and circumstances indicate impairment might have occurred. The Company tests its goodwill at the reporting unit level using a two-step process. The first step is 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 exceeds the carrying value of the net assets assigned to a reporting unit, goodwill is considered not impaired and no further testing is required. If the fair value is less than the carrying value, step two is completed to measure the amount of impairment, if any. In step two, the implied fair value of goodwill is compared to its carrying amount. The implied fair value of goodwill is computed by subtracting the sum of the fair values of the individual asset categories (tangible and intangible) from the indicated fair value of the reporting unit as determined under step one. An impairment charge is recognized to the extent that the carrying amount of goodwill exceeds its implied fair value.

The Company utilizes 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. These approaches require assumptions and estimates of many critical factors, including revenue and market growth, operating cash flows, market multiples, and discount rates, which are based on the current economic environment and credit market conditions.

In the January 2011 transaction, the $8.0 million balance of goodwill was transferred from LEAF Financial to LEAF. The Company tests this goodwill annually on May 31st for impairment. Based on a third-party valuation, the Company concluded that, as of May 31, 2011, there has been no impairment of goodwill. As a result of the deconsolidation of LEAF (see Note 27) subsequent to fiscal 2011, the Company will no longer reflect this goodwill on its consolidated balance sheets.

Long-lived assets and identifiable intangibles with finite lives are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an 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 is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are 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

The Company's policies permit it to enter 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. The Company has designed these transactions as cash flow hedges. The contracts or hedge instruments are evaluated at inception and at subsequent balance sheet dates to determine if they continue to qualify for hedge accounting and, accordingly, derivatives are recognized on the balance sheet at fair value. U.S. GAAP requires recognition of all derivatives at fair value as either assets or liabilities in the consolidated balance sheets. The Company records changes in the estimated fair value of the derivative in accumulated other comprehensive income (loss) to the extent that it is effective. Any ineffective portion of a derivative's change in fair value will be immediately recognized in earnings.

Before entering into a derivative transaction for hedging purposes, the Company determines whether a high degree of initial effectiveness exists 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. High effectiveness means that the change in the value of the derivative is expected to provide a high degree of offset against changes in the value of the hedged forecasted transactions caused by changes in interest rate risk. The Company measures the effectiveness of each cash flow hedge throughout the hedge period. Any hedge ineffectiveness on cash flow hedging relationships, as defined by U.S. GAAP, will be recognized in the consolidated statements of operations.

There can be no assurance that the Company's hedging strategies or techniques will be effective, that profitability will not be adversely affected during any period of change in interest rates, or that the costs of hedging will not exceed the benefits.

Recent Accounting Standards

Accounting Standards Issued But Not Yet Effective

The Financial Accounting Standards Board (“FASB”) has issued the following accounting standards, which were not yet effective for the Company as of September 30, 2011:

Testing goodwill for impairment. In December 2010 and again in September 2011, the FASB issued guidance with respect to testing goodwill for impairment. In connection with the November 2011 LCC Transaction (see Note 27) and resulting deconsolidation of LEAF, the Company will no longer reflect goodwill on its balance sheet. Accordingly, these amendments will not have an impact on the Company's financial statements.

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). The Company plans to provide the disclosures as required by this amendment beginning October 1, 2012.

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 does 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 will become effective for the Company beginning January 1, 2012. The Company is currently evaluating the impact this amendment will have, if any, on its financial statements.

Newly-Adopted Accounting Principles

The Company's adoption of the following standards during fiscal 2011 did not have a material impact on its consolidated financial position, results of operations or cash flows:

Troubled debt restructurings. In fiscal 2010, the FASB issued guidance that requires the disclosure of more detailed information on the nature and extent of troubled debt restructurings and their effect on the allowance for loan and lease losses. In April 2011, the FASB issued additional guidance related to determining whether a creditor has granted a concession, including factors and examples for creditors to consider in evaluating whether a restructuring results in a delay in payment that is insignificant, prohibits creditors from using the borrower's effective rate test to evaluate whether a concession has been granted to the borrower, and adds factors for creditors to use in determining whether a borrower is experiencing financial difficulties.

Transfers of financial assets. In June 2009, the FASB amended prior guidance on accounting for transfers of financial assets. The new pronouncement changes the derecognition guidance for the transferors of financial assets, eliminates the exemption from consolidation for qualifying special-purpose entities and requires additional disclosures about all transfers of financial assets.

Disclosure about the credit quality of financing receivables and the allowance for credit losses. In July 2010, the FASB issued guidance that requires companies to provide more information about the credit quality of their financing receivables including, but not limited to, significant purchases and sales of financing receivables, aging information and credit quality indicators. The Company has provided the required disclosures in the notes to these consolidated financial statements.

Variable interest entities. In June 2009, the FASB issued guidance to revise the approach to determine when a VIE should be consolidated. The new consolidation model for VIEs considers whether the company has the power to direct the activities that most significantly impact the VIE's economic performance and shares in the significant risks and rewards of the entity. The guidance on VIEs requires companies to continually reassess VIEs to determine if consolidation is appropriate and to provide additional disclosures.