HR Block 2007 Annual Report Download - page 84

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS –Our operating subsidiaries provide a segment reporting, financial data for discontinued businesses is no
variety of financial services to the general public, principally in the U.S. longer reflected in the previously applicable reportable segment. See
Specifically, we offer tax return preparation; accounting, tax and note 20 for additional information.
consulting services to business clients; investment services through a MANAGEMENT ESTIMATES –The preparation of financial
registered broker-dealer; traditional consumer banking services; tax statements in conformity with generally accepted accounting principles
preparation and related software; and refund anticipation loans offered requires management to make estimates and assumptions that affect the
by a third-party lending institution. Tax preparation services are also reported amounts of assets and liabilities and disclosure of contingent
provided in Canada and Australia. Our discontinued operations are assets and liabilities at the date of the financial statements, and the
primarily engaged in the origination, sale and servicing of non-prime reported amounts of revenues and expenses during the reporting
and prime mortgage loans. periods. Actual results could differ from those estimates.
PRINCIPLES OF CONSOLIDATION –The consolidated financial CASH AND CASH EQUIVALENTS –Cash and cash equivalents
statements include the accounts of the Company and our wholly-owned include cash on hand, cash due frombanks, securities purchased under
and majority-owned subsidiaries. All material intercompany agreements to resell and federal funds sold. For purposes of the
transactions and balances have been eliminated. consolidated balance sheets and consolidated statements of cash flows,
Some of our subsidiaries operate in regulated industries, and their all non-restricted highly liquid instruments purchased with an original
underlying accounting records reflect the policies and requirements of maturity of three months or less are considered to be cash equivalents.
these industries. Book overdrafts included in accounts payable totaled $101.1 million and
RECLASSIFICATIONS –Certain reclassifications have been made to $128.7 million at April 30, 2007 and 2006, respectively.
prior year amounts to conform to the current year presentation. These Our broker-dealer purchases securities under agreements to resell
reclassifications had no effect on the results of operations or and accounts for them as collateralized financings. The securities are
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stockholders’ equity as previously reported. carried at the amounts at which the securities will be subsequently
In March 2006, the Office of Thrift Supervision (OTS) approved the resold, as specified in the respective agreements. It is our policy to take
charter of H&R Block Bank (HRB Bank). HRB Bank commenced possession of securities, subject to resale agreements. The securities
operations on May 1, 2006 as a wholly-owned subsidiary, at which time are revalued daily and collateral added whenever necessary to bring
we realigned certain segments of our business to reflect a new market value of the underlying collateral to a level equal to or greater
management reporting structure. The previously reported Investment than the repurchase amount specified in the contracts.
Services segment and HRB Bank have been combined in the Consumer CASH AND CASH EQUIVALENTS –RESTRICTED –Cash and cash
Financial Services segment. equivalents -restricted consists primarily of cash and securities
On November 6, 2006, we announced we would evaluate strategic purchased under agreements to resell which has been segregated in a
alternatives for Option One Mortgage Corporation (OOMC), a wholly- special reserve account for the exclusive benefit of customers pursuant
owned subsidiary, including a possible sale or other transaction through to federal regulations under Rule 15c3-3 of the Securities Exchange Act
the public markets. On April 19, 2007, we entered into an agreement to of 1934.
sell OOMC. In conjunction with this plan, we also announced we would MARKETABLE SECURITIES –TRADING –Certain marketable debt
terminate the operations of H&R Block Mortgage Corporation securities held by our broker-dealer are classified as trading and carried
(HRBMC), a wholly-owned subsidiary of OOMC. Additionally, during at market value based on quoted prices, with changes in market value
fiscal year 2007, we committed to a plan to sell and/or completed the recorded in the consolidated income statements. These securities are
wind-down of three smaller lines of business previously reported in our included in prepaid expenses and other current assets on the
Business Services segment, as well as our tax operations in the United consolidated balance sheets.
Kingdom previously reported in Tax Services. During fiscal year 2007, RECEIVABLES FROM CUSTOMERS, BROKERS, DEALERS AND
we met the criteria requiring us to present the related financial results CLEARING ORGANIZATIONS AND ACCOUNTS PAYABLE TO
of these businesses as discontinued operations and the assets and CUSTOMERS, BROKERS AND DEALERS –Customer receivables and
liabilities of all of the businesses being sold as held-for-sale in the payables consist primarily of amounts due on margin and cash
consolidated financial statements. All periods presented have been transactions. These receivables are collateralized by customers’
reclassified to reflect our discontinued operations. For purposes of
H&R BLOCK 2007 Form 10K