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62 2015 Form 10-K | H&R Block, Inc.
The following table presents the assets that were remeasured at fair value on a non-recurring basis during the fiscal
years ended April 30, 2015 and 2014 and the losses on those remeasurements:
(dollars in 000s)
Total Level 1 Level 2 Level 3 Losses
As of April 30, 2015:
Impaired mortgage loans held for
investment $ 56,784 $ — $ — $ 56,784 $ (1,678)
As a percentage of total assets 1.3% — — 1.3%
As of April 30, 2014:
Impaired mortgage loans held for
investment $ 69,131 $ — $ — $ 69,131 $ (3,739)
As a percentage of total assets 1.5% — — 1.5%
The fair value of impaired mortgage loans held for investment is generally based on the net present value of
discounted cash flows for TDR loans or the appraised value of the underlying collateral for all other loans. Impaired
and TDR loans are required to be remeasured at least annually, based on HRB Bank's loan policy. These loans are
classified as Level 3.
We have established various controls and procedures to ensure that the unobservable inputs used in the fair value
measurement of these instruments are appropriate. Appraisals are obtained from certified appraisers and reviewed
internally by HRB Bank's asset management group. The inputs and assumptions used in our discounted cash flow
model for TDRs are reviewed and approved by HRB Bank management each time the balances are remeasured.
Significant changes in fair value from the previous measurement are presented to HRB Bank management for approval.
There were no changes to the unobservable inputs used in determining the fair values of our Level 3 financial assets.
The following table presents the quantitative information about our Level 3 fair value measurements, which utilize
significant unobservable internally-developed inputs:
(dollars in 000s)
Fair Value at
April 30, 2015
Valuation
Technique Unobservable Input
Range
(Weighted Average)
Impaired mortgage loans held
for investment - non TDRs
$ 67,214 Collateral-
based
Cost to list/sell
Time to sell (months)
Collateral depreciation
Loss severity
0% – 167%(10%)
12(12)
(128%) – 100%(35%)
0% – 100%(61%)
Impaired mortgage loans held
for investment - TDRs
$ 32,759 Discounted
cash flow Aged default performance
Loss severity
24% – 38%(31%)
0% – 23%(7%)