Receivables from Customers and Notes Receivable, net

Receivables from customers, net and notes receivable, net include a provision for bad debts, which reflects the Company's best estimate of probable losses inherent in the receivables from customers and notes receivable. The Company provides for an allowance for doubtful accounts based on a specific-identification basis. The Company continually reviews its provision for bad debts. The allowance for doubtful accounts related to receivables from customers was $2.8 million and $11.8 million as of June 30, 2012 and September 30, 2011, respectively. The allowance for doubtful accounts related to notes receivable was $0.1 million as of June 30, 2012 and September 30, 2011, respectively.

Bad debt expense, net of recoveries, for the three and nine months ended June 30, 2012 was $0.7 million, respectively, and included charges to bad debt expense related to a customer deficit account within the C&RM segment. During the nine months ended June 30, 2012, the Company charged-off receivables on consigned gold transactions which were fully reserved. During the three and nine months ended June 30, 2011, the Company recorded bad debt expense, net of recoveries, of $1.2 million and $4.0 million, respectively. During the three and nine months ended June 30, 2011, increases to the allowance for doubtful accounts were $3.0 million and $7.5 million, respectively. The increase in the provision for the three months ended June 30, 2011 was primarily related to an additional loss recognized on a customer to whom the Company had consigned gold, in the C&RM segment. During the nine months ended June 30, 2011, the provision increase also included amounts for another customer to whom the Company had consigned gold, in the C&RM segment, and a clearing customer deficit account in the CES segment. During the three and nine months ended June 30, 2011, the Company recorded recoveries of $1.8 million and $3.7 million, respectively, of bad debt expense. The three months ended June 30, 2011, recovery of $1.8 million related to a decrease in the bad debt provision on a previous customer account deficit, in the C&RM segment, based on an increase in the amount considered collectible. During the nine months ended June 30, 2011, recoveries also include $1.3 million following a settlement relating to a disputed trade that was “given-up” to FCStone, LLC during the quarter ended June 30, 2010.

Activity in the allowance for doubtful accounts and notes was as follows:



(in millions)
Balance, September 30, 2011	$	11.9
Provision for bad debts	0.5
Deductions:
Charge-offs	(9.5		)
Recoveries	—
Balance, June 30, 2012	$	2.9

Additionally, in the normal course of operations the Company accepts notes receivable under sale/repurchase agreements with customers. These transactions are short-term in nature, and are treated as secured borrowings rather than commodity inventory, purchases and sales in the Company’s condensed consolidated financial statements. As of June 30, 2012 and September 30, 2011, the Company had outstanding notes receivable of $10.3 million and $24.3 million, respectively, related to this program.