Allowance for Doubtful Accounts

12 Months Ended

Sep. 30, 2021

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. In determining expected credit losses and establishing its allowance for doubtful accounts, the Company considers a number of factors including, but not limited to, historical collection experience, current and forecasted economic and business conditions, internal and external credit risk ratings, collateral terms, payment terms and aging of the financial asset, as well as specific-identification in certain circumstances. 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 $1.3 million as of September 30, 2021 and 2020. The allowance for doubtful accounts related to receivables from clients was $38.5 million and $25.8 million as of September 30, 2021 and 2020, respectively. The Company had no allowance for doubtful accounts related to notes receivable as of September 30, 2021 and 2020.

During the year ended September 30, 2021, the Company charged off $5.9 million of receivables against the allowance for doubtful accounts. During the year ended September 30, 2020, the Company charged off $35.6 million of receivables against the allowance for doubtful accounts related to the physical coal business, which the Company exited in the year ended September 30, 2018.

During the year ended September 30, 2021, the Company recorded bad debt expense of $10.4 million. The bad debt expense was primarily related to $8.5 million of client OTC derivative account deficits in the Commercial segment, $0.6 million of client exchange-traded futures and options on futures account deficits in the Institutional segment, $1.1 million of OTC derivative client account deficits in the Retail segment, and $0.2 million in the Global Payments segment. $4.6 million of the bad debt within the Commercial segment related to a particular energy product in the Company’s physical energy commodity business.

During the year ended September 30, 2020, the Company recorded bad debt expense, net of recoveries, of $13.0 million. The bad debt expense during the year ended September 30, 2020 primarily related to $3.5 million of client OTC derivative account deficits in the Commercial segment, $5.4 million of client exchange-traded futures and options on futures account deficits in the Institutional segment, and $0.6 million of OTC derivative client account deficits in the Retail segment. The Company also incurred bad debt expense of $3.2 million within the Commercial segment related to receivables in the Company’s physical energy commodity business.

During the year ended September 30, 2019, the Company recorded bad debt expense, net of recoveries, of $2.5 million, including a net increase in provision for bad debts of $2.6 million, direct write-offs of $0.3 million, and direct recoveries of $0.4 million. The increase in provision for bad debts during the year ended September 30, 2019 primarily related to $2.7 million of client OTC derivative account deficits in the Commercial segment, and $1.4 million in the Institutional segment, partially offset by client recoveries in the Commercial segment. Additionally, during the year ended September 30, 2019, the Company recorded recoveries on bad debt on physical coal of $12.4 million, reducing the allowance for doubtful accounts related to deposits with and receivables from broker-dealers, clearing organizations, and counterparties. See additional information in Note 19.

Activity in the allowance for doubtful accounts for the years ended September 30, 2021, 2020, and 2019 was as follows:


(in millions)	2021		2020		2019
Balance, beginning of year	$	27.1	$	48.6	$	58.2
ASU 2016-13 cumulative transition adjustment	8.2		—		—
Adjusted balance, beginning of year	35.3		48.6		58.2
Provision for (recovery of) bad debts	10.4		13.0		(9.8)
Allowance charge-offs	(5.9)		(35.6)		(1.3)

Other(1)	—		1.1		1.5
Balance, end of year	$	39.8	$	27.1	$	48.6
(1) Allowance increase is related to a recoverable amount due from an affiliated party and recorded in Other assets on the Consolidated Balance Sheets.