Allowance for Doubtful Accounts

Deposits with and receivables from broker-dealers, clearing organizations, and counterparties, net, receivables from clients, net, and notes receivable, net include an allowance for doubtful accounts, which reflects the Company’s best estimate of probable losses inherent in the accounts. The Company provides for an allowance for doubtful accounts based on a specific-identification basis. The Company continually reviews its allowance for doubtful accounts. The allowance for doubtful accounts related to deposits with and receivables from broker-dealers, clearing organizations, and counterparties was $48.0 million and $47.0 million as of September 30, 2018 and 2017, respectively. The allowance for doubtful accounts related to receivables from clients was $10.2 million and $7.6 million as of September 30, 2018 and 2017, respectively. The Company had no allowance for doubtful accounts related to notes receivable as of September 30, 2018 and 2017.

During the year ended September 30, 2018, the Company recorded bad debt expense related to clients, net of recoveries, of $3.1 million, including provision net increases of $2.9 million, direct write-offs of $0.3 million, and recoveries of $0.1 million. The increase in bad debts during fiscal 2018 primarily related to $2.8 million of agricultural OTC client account deficits in the Commercial Hedging segment and $0.4 million of exchange-traded client account deficits in the Clearing & Execution Services segment, partially offset by a provision decrease in the Physical Commodities segment.

During the year ended September 30, 2017, the Company recorded bad debt expense related to clients, net of recoveries, of $4.3 million, including provision increases of $4.2 million and direct write-offs of $0.1 million. The increase in bad debts during fiscal 2017 primarily related to $3.8 million of client deficits in the Commercial Hedging segment, primarily related to account deficits from South Korean and Dubai commercial LME clients, $0.2 million of uncollectible client receivables in the Physical Commodities segment, and $0.3 million of uncollectible client receivables in the Clearing & Execution Services segment, primarily related to our derivatives voice brokerage business.

During first quarter of fiscal 2018 and the fourth quarter of fiscal 2017, the Company recorded charges to earnings of $1.0 million and $47.0 million, respectively, to record an allowance for doubtful accounts related to a bad debt incurred in the physical coal business conducted solely in INTL Asia Pte. Ltd., with a coal supplier (counterparty), as further discussed in Note 17.

During the year ended September 30, 2016, the Company recorded bad debt expense related to clients, net of recoveries, of $4.4 million, including provision increases of $4.2 million and direct write-offs of $0.4 million, offset by recoveries of $0.2 million. The increase in bad debts during fiscal 2016 primarily related to $3.6 million of client deficits in the Commercial Hedging segment, $0.4 million of uncollectible client receivables in the Physical Commodities segment, and $0.4 million of uncollectible service fees and notes in the Securities segment.

Activity in the allowance for doubtful accounts for the years ended September 30, 2018, 2017, and 2016 was as follows:



(in millions)	2018			2017			2016
Balance, beginning of year	$	54.6		$	9.7		$	11.2
Provision for bad debts	3.9			51.0			4.2
Charge-offs	(0.3		)	(6.1		)	(5.7		)
Balance, end of year	$	58.2		$	54.6		$	9.7