HR Block 2007 Annual Report Download - page 34

During fiscal year 2007, we committed to a plan to sell and/or advantage in the geographic areas in which we are currently located
completed the wind-down of three smaller lines of business. As of based on the breadth of services we can offer to these clients above and
April 30, 2007, we met the criteria requiring us to present the related beyond what a traditional accounting firm can offer.
financial results of these businesses as discontinued operations and the GOVERNMENT REGULATION –Many of the same federal and state
assets and liabilities of all of the businesses being sold as held-for-sale regulations relating to tax preparers and the information concerning tax
in the consolidated financial statements for all periods presented. See reform discussed previously in Tax Services apply to the Business
additional discussion in Item 8, note 20 to our consolidated financial Services segment as well. However, accountants are not subject to the
statements. same prohibition on the use or disclosure of certain income tax return
RELATIONSHIP WITH ATTEST FIRMS –By regulation, we cannot information as tax professionals. Accounting firms are also subject to
provide audit and attest services. McGladrey & Pullen LLP (M&P) and state and federal regulations governing accountants, auditors and
other public accounting firms, including those public accounting firms financial planners.
previously associated with AmexTBS, with whom we do business Auditorindependence rules of the Securities and Exchange
(collectively, ‘‘the Attest Firms’’) provide audit and review services and Commission (SEC) and the Public Company Accounting Oversight
other services in which the Attest Firms issue written reports on client Board (PCAOB) apply to the Attest Firms as public accounting firms. In
financial statements. Through a number of agreements, including applying its auditor independence rules, the SEC views us and the
agreements with these Attest Firms, we lease accounting personnel and Attest Firms as a single entity and requires that the SEC independence
provide accounting, payroll, human resources and other administrative rules for the Attest Firms apply to us and that we be independent of any
services to the Attest Firms and receive a management fee for these SEC audit client of the Attest Firms. The SEC regards any financial
services. We also have a cost-sharing arrangement with the Attest Firms, interest or prohibited business relationship we have with a client of the
whereby they reimburse us for the costs of certain items, mainly Attest Firms as a financial interest or prohibited business relationship
supplies and for the use of RSM-owned or leased real estate, property between the Attest Firms and the client for purposes of applying its
and equipment. The Attest Firms are limited liability partnerships with auditor independence rules.
their own management committees, legal and business advisors, We and the Attest Firms have jointly developed and implemented
professional liability insurance and risk management policies. policies, procedures and controls designed to ensure the Attest Firms’
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Accordingly, the Attest Firms are separate legal entities and not independence and integrity as an audit firm in compliance with
affiliates. Some partners and employees of the Attest Firms are also applicable SEC regulations and professional responsibilities. These
employees of RSM. policies, procedures and controls are designed to monitor and prevent
SEASONALITY OF BUSINESS –Revenues for this segment are largely violations of applicable independence rules and include, among other
seasonal in nature, with peak revenues occurring during January things, (1) informing our officers, directors and other members of senior
through April. management concerning auditor independence matters, (2) procedures
COMPETITIVE CONDITIONS –The accounting, tax and consulting for monitoring securities ownership, (3) communicating with SEC audit
business is highly competitive. The principal methods of competition clients regarding the SEC’s interpretation and application of relevant
are price, service and reputation for quality. There are a substantial independence rules and guidelines, and (4) requiring RSM employees to
number of accounting firms offering similar services at the comply with the Attest Firms’ independence and relationship policies
international, national, regional and local levels. As our focus is on (including the Attest Firms’ independence compliance questionnaire
middle-market businesses, our principal competition is with national procedures).
and regional accounting firms. We believe we have a competitive See discussion in Item 1A, ‘‘Risk Factors’’ for additional information.
CONSUMER FINANCIAL SERVICES
GENERAL –Our Consumer Financial Services segment is primarily H&R BLOCK FINANCIAL ADVISORS –HRBFAoffers our clients
engaged in offering brokerage services, along with investment planning traditional brokerage services, as well as annuities, insurance, fee-based
and related financial advice through H&R Block Financial Advisors, Inc. accounts, online account access, equity research and focus lists, model
(HRBFA) and full-service banking through HRB Bank. HRBFA and HRB portfolios, asset allocation strategies, and other investment tools and
Bank, our ‘‘Block-branded’’ businesses, are focused on increasing retail information to clients in the U.S.
tax client loyalty and retention by offering expanded financial services. HRBFAis a registered broker-dealer with the SEC and is a member of
Segment revenues constituted 9.7% of our consolidated revenues of the New York Stock Exchange (NYSE), other national securities
continuing operations for fiscal year 2007, 8.1% for 2006 and 7.6% for exchanges, Securities Investor Protection Corporation (SIPC), and the
2005. National Association of Securities Dealers, Inc. (NASD). HRBFA is also
H&R BLOCK 2007 Form 10K