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H&R Block, Inc. | 2015 Form 10-K 63
ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS – The carrying amounts and estimated fair values of our financial
instruments are as follows:
(in 000s)
As of April 30, 2015 2014
Carrying
Amount
Estimated
Fair Value
Carrying
Amount
Estimated
Fair Value
Fair Value
Hierarchy
Assets:
Cash and cash equivalents $ 2,007,190 $ 2,007,190 $ 2,185,307 $ 2,185,307 Level 1
Cash and cash equivalents - restricted 91,972 91,972 115,319 115,319 Level 1
Receivables, net - short-term 167,964 167,964 191,618 191,618 Level 1
Mortgage loans held for investment, net 239,338 190,196 268,428 192,281 Level 3
Investments in AFS securities 441,709 441,709 427,824 427,824 Level 1 and 2
Receivables, net - long-term 80,867 80,867 104,678 104,678 Level 1 and 3
Liabilities:
Customer banking deposits 744,699 737,261 770,288 765,376 Level 1 and 3
Long-term debt 506,088 556,769 906,474 955,050 Level 2
Contingent consideration payments 10,667 10,667 9,206 9,206 Level 3
Fair value estimates, methods and assumptions are set forth below. The fair value was not estimated for assets
and liabilities that are not considered financial instruments.
Cash and cash equivalents, including restricted - Fair value approximates the carrying amount.
Receivables, net - short-term - For short-term balances the carrying values reported in the balance sheet
approximate fair market value due to the relative short-term nature of the respective instruments.
Mortgage loans held for investment, net - The fair value of mortgage loans held for investment is estimated
using a third-party pricing service. The fair value is determined using the present value of expected future
cash flows at the asset level, assuming future prepayments and using discount factors determined by prices
obtained for residential loans with similar characteristics in the secondary market, as discounted for illiquid
assets. Quarterly, we perform analytics to assess the reasonableness of the fair value received from the third-
party pricing service based on changes in the portfolio and changes in market conditions. We evaluate whether
adjustments to third-party pricing is necessary and historically, we have not made adjustments to prices
obtained from our third-party pricing service.
Investments in AFS securities - For mortgage-backed securities, we use a third-party pricing service to
determine fair value. The service's pricing model is based on market data and utilizes available trade, bid and
other market information for similar securities (Level 2). The fair value of our investment in common stock
is determined based on quoted market prices (Level 1).
Receivables, net - long-term - The carrying values for the long-term portion of loans to franchisees
approximate fair market value due to variable interest rates, low historical delinquency rates and franchise
territories serving as collateral (Level 1). Long-term EA receivables are carried at net realizable value which
approximates fair value (Level 3). Net realizable value is determined based on historical collection rates.
Customer banking deposits - The fair value of deposits with no stated maturity, such as non-interest-bearing
demand deposits, checking, money market and savings accounts, is equal to the amount payable on demand
(Level 1). The fair value of IRAs and other time deposits is estimated by discounting the future cash flows
using the rates currently offered by HRB Bank for products with similar remaining maturities (Level 3).
Long-term debt - The fair value of our Senior Notes is based on quotes from multiple banks.
Contingent consideration payments - Fair value approximates the carrying amount.
NOTE 12: STOCKHOLDERS' EQUITY
COMMON STOCK – While we had no repurchases or retirements of common stock in fiscal years 2015 or 2014, during
fiscal year 2013, we repurchased and retired 21.3 million shares of stock at a cost of $315.0 million, and retired 60.0
million shares of treasury stock. The retirement of treasury stock had no impact on our total consolidated stockholders'
equity.