HR Block 2007 Annual Report Download - page 89

note 5 for fair value of mortgage loans held for investment, note 9 for tax benefits of uncertain tax positions to be accounted for in the period
the fair value of time deposits and note 10 for fair value of long-term of change rather than as a component of the annual effective tax rate.
debt. The provisions of this standard are effective as of the beginning of our
NEW ACCOUNTING STANDARDS –In February 2007, Statement of fiscal year 2008. The adoption of FIN 48 will not have a material impact
Financial Accounting Standards No. 159, ‘‘The Fair Value Option for on our consolidated financial statements.
Financial Assets and Financial Liabilities –Including an Amendment of In June 2006, Emerging Issues Task Force Issue No. 06-3, ‘‘How Sales
FASB Statement No. 115,’’ (SFAS 159), was issued. This standard allows Taxes Collected from Customers and Remitted to Governmental
a company to irrevocably elect fair value as the initial and subsequent Authorities Should Be Presented in the Income Statement (That Is,
measurement attribute for certain financial assets and financial Gross Versus Net Presentation)’’ (EITF 06-3) was issued. EITF 06-3
liabilities on a contract-by-contract basis, with changes in fair value requires disclosure of the presentation of taxes on either a gross
recognized in earnings. The provisions of this standard are effective as (included in revenues and costs) or a net (excluded from revenues)
of the beginning of our fiscal year 2009, with early adoption permitted. basis as an accounting policy decision. The provisions of this standard
We are currently evaluating what effect the adoption of SFAS 159 will are effective for interim and annual reporting periods beginning after
have on our consolidated financial statements. December 15, 2006. The adoption of EITF 06-3 did not have a material
In September 2006, Statement of Financial Accounting Standards impact on our consolidated financial statements.
No. 157, ‘‘Fair Value Instruments,’’ (SFAS 157), was issued. The In March 2006, Statement of Financial Accounting Standards No. 156,
provisions of this standard include guidelines about the extent to which ‘‘Accounting for Servicing of Financial Assets –AnAmendment of FASB
companies measure assets and liabilities at fair value, the effect of fair Statement No. 140,’’ (SFAS 156), was issued. The provisions of this
value measurements on earnings, and establishes a fair value hierarchy standard require mortgage servicing rights to be initially valued at fair
that prioritizes the information used in developing assumptions used value. SFAS 156 allows servicers to choose to subsequently measure
when valuing an asset or liability. The provisions of this standard are their servicing rights at fair value or to continue using the ‘‘amortization
effective as of the beginning of our fiscal year 2009. We are currently method’’ under SFAS 140. The provisions of this standard are effective
evaluating what effect the adoption of SFAS 157 will have on our as of the beginning of our fiscal year 2008. The adoption of SFAS 156
consolidated financial statements. will not have a material impact on our consolidated financial
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In September 2006, Staff Accounting Bulleting No. 108, ‘‘Financial statements. We will adopt SFAS 156 on May 1, 2007. Upon adoption we
Statements – Considering the Effects of Prior Year Misstatements when identified MSRs relating to all existing residential mortgage loans as a
Quantifying Misstatements in Current Year Financial Statements’’ class of servicing rights and elected to continue to use the ‘‘amortization
(SAB 108), was issued. SAB 108 provides guidance on how prior year method’’ for these MSRs. Presently, this class represents all of our
misstatements should be quantified when determining if current year MSRs.
financial statements are materially misstated. These provisions are In February 2006, Statement of Financial Accounting Standards
effective for the current fiscal year. The adoption of SAB 108 did not No. 155, ‘‘Accounting for Certain Hybrid Instruments –An Amendment
impact our consolidated financial statements. of FASB Statements No. 133 and 140’’ (SFAS 155), was issued. The
In September 2006, Emerging Issues Task Force Issue No. 06-4, provisions of this standard establish a requirement to evaluate interests
‘‘Accounting for Deferred Compensation and Postretirement Benefit in securitized financial assets to identify interests that are freestanding
Aspects of Endorsement Split-Dollar Life Insurance Arrangements’’ derivatives or that are hybrid financial instruments that contain an
(EITF 06-4) was issued. EITF 06-4 requires the recognition of a liability embedded derivative requiring bifurcation. The standard permits a
for an agreement with an employee to provide future postretirement hybrid financial instrument to be accounted for in its entirety if the
benefits, as this obligation is not effectively settled upon entering into holder irrevocably elects to measure the hybrid financial instrument at
an insurance arrangement. The provisions of this standard are effective fair value, with changes in fair value recognized currently in earnings.
as of the beginning of our fiscal year 2009. We are currently evaluating The provisions of this standard are effective as of the beginning of our
what effect the adoption of EITF 06-4 will have on our consolidated fiscal year 2008. Our residual interests typically have interests in
financial statements. derivative instruments embedded within the securitization trusts. Upon
In June 2006, FASB Interpretation No. 48, ‘‘Accounting for adoption, we will elect to account for our residual interests on a fair
Uncertainty in Income Taxes’’ (FIN 48), was issued. The interpretation value basis, with changes in fair value recorded in earnings in the period
requires that a tax position meet a ‘‘more-likely-than-not’’ recognition in which the change occurs. Prior to adoption, we accounted for our
threshold for the benefit of the uncertain tax position to be recognized residual interests as AFS securities with unrealized gains recorded in
in the financial statements and provides guidance on the measurement other comprehensive income.
of the benefit. The interpretation also requires interim period estimated
H&R BLOCK 2007 Form 10K