Allowance for Doubtful Accounts

12 Months Ended

Sep. 30, 2022

Deposits with and receivables from broker-dealers, clearing organizations, and counterparties, net; receivable from clients, net; and notes receivable, net include allowances for doubtful accounts, which reflect the Company’s best estimates 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 $1.4 million and $1.3 million as of September 30, 2022 and 2021. The allowance for doubtful accounts related to receivables from clients was $46.4 million and $38.5 million as of September 30, 2022 and 2021, respectively. The Company had no allowance for doubtful accounts related to notes receivable as of September 30, 2022 and 2021.

During the years ended September 30, 2022 and September 30, 2021, the Company charged off $5.6 million and $5.9 million, respectively, 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, 2022, the Company recorded bad debt expense of $12.4 million, related to the allowance. The bad debt expense was primarily caused by $11.6 million of deficits in the Commercial segment, which includes $2.5 million in physical commodity accounts, and $2.3 million of client deficits in the Retail segment.

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.

Activity in the allowance for doubtful accounts for the years ended September 30, 2022, 2021, and 2020 was as follows:


(in millions)	2022		2021		2020
Balance, beginning of year	$	39.8	$	27.1	$	48.6
ASU 2016-13 cumulative transition adjustment	—		8.2		—
Adjusted balance, beginning of year	39.8		35.3		48.6
Provision for bad debts(2)	12.4		10.4		13.0
Allowance charge-offs	(5.6)		(5.9)		(35.6)

Other(1)	1.2		—		1.1
Balance, end of year	$	47.8	$	39.8	$	27.1
(1) Allowance increase is related to a recoverable amount due from an affiliated party and recorded in Other assets on the Consolidated Balance Sheets.
(2) An additional $3.4 million is included in bad debt expense for the year ended September 30, 2022 on the consolidated income statement, which is not included in the allowance at the year then ended.