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recognized currently in earnings. The provisions of this standard are the arrangement. EITF 00-21 impacts revenue recognition related to tax
effective as of the beginning of our fiscal year 2008, although early preparation in our premium tax offices where POM guarantees are
adoption is permitted. Our residual interests typically have interests in included in the price of a completed tax return. Prior to the adoption of
derivative instruments embedded within the securitization trusts. If we EITF 00-21, revenues related to POM guarantees at premium offices
elect to account for our residual interests on a fair value basis, changes were recorded in the same period as tax preparation revenues.
in fair value will impact earnings in the period in which the change Beginning May 1, 2003, revenues related to POM guarantees are now
occurs. We are currently evaluating what effect the adoption of initially deferred and recognized over the guarantee period in
SFAS 155 will have on our consolidated financial statements. proportion to POM claims paid. As a result of the adoption of
In March 2006, Statement of Financial Accounting Standards No. 156, EITF 00-21, we recorded a cumulative effect of a change in accounting
‘‘Accounting for Servicing of Financial Assets – An Amendment of FASB principle of $6.4 million, net of a tax benefit of $4.0 million, as of May 1,
Statement No. 140,’’ (SFAS 156), was issued. The provisions of this 2003. Revenues recognized during fiscal year 2004, which were initially
standard require mortgage servicing rights to be initially valued at fair recognized in prior periods and recorded as part of the cumulative
value. SFAS 156 also allows servicers to choose to measure their effect of a change in accounting principle, totaled $36.3 million.
servicing rights at fair value or to continue using the ‘‘amortization In August 2005, the Financial Accounting Standards Board
method’’ under SFAS 140. The provisions of this standard are effective (FASB) issued an exposure draft which amends Statement of Financial
as of the beginning of our fiscal year 2008, although early adoption is Accounting Standards No. 140, ‘‘Accounting for Transfers and Servicing
permitted. We are currently evaluating what effect the adoption of of Financial Assets and Extinguishments of Liabilities.’’ This exposure
SFAS 156 will have on our consolidated financial statements. draft seeks to clarify the derecognition requirements for financial assets
In December 2004, Statement of Financial Accounting Standards and the initial measurement of interests related to transferred financial
No. 123 (revised 2004), ‘‘Share-Based Payment,’’ (SFAS 123R) was assets that are held by a transferor. Our current off-balance sheet
issued. SFAS 123R requires all entities to recognize the cost of employee warehouse facilities (the Trusts) in our Mortgage Services segment
services received in exchange for awards of equity instruments based would be required to be consolidated in our financial statements based
on the grant-date fair value of those awards. Compensation expense on the provisions of the exposure draft. We will continue to monitor the
must be recognized for the unvested portions of all awards outstanding status of the exposure draft and consider what changes, if any, could be
as of the date of adoption. The provisions of this standard were delayed made to the structure of the Trusts to continue to derecognize mortgage
by the SEC and will be effective as of the beginning of our fiscal year loans transferred to the Trusts. At April 30, 2006, the Trusts held loans
2007. The adoption of SFAS 123R will not have a material impact on our and debt totaling $7.8 billion, which we would be required to
consolidated financial statements. consolidate into our financial statements under the provisions of this
In August 2003, we adopted Emerging Issues Task Force Issue exposure draft. The final standard for this exposure draft is scheduled
No. 00-21, ‘‘Revenue Arrangements with Multiple Deliverables’’ to be issued in the first quarter of calendar year 2007.
(EITF 00-21). EITF 00-21 requires consideration received in connection The estimated impact of these new accounting standards reflects
with arrangements involving multiple revenue generating activities be current views. There may be material differences between these
measured and allocated to each separate unit of accounting. Revenue estimates and the actual impact of these standards.
recognition is determined separately for each unit of accounting within
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H&R BLOCK 2006 Form 10K