HR Block 2006 Annual Report Download - page 109

concentration risk, maintaining minimum credit quality and limiting following table represents hypothetical instantaneous and sustained
inventory to anticipated retail demand and current market conditions. parallel shifts in interest rates and should not be relied on as an
The sensitivities of certain financial instruments to changes in indicator of future expected results.
interest rates as of April 30, 2006 and 2005 are presented below. The
(in 000s)
Basis Point Change
Carrying Value at
April 30, 2006 – 300 – 200 – 100 – 50 + 50 + 100 + 200 + 300
Mortgage loans held for investment $ 407,538 $ 16,285 $ 10,885 $ 5,485 $ 2,785 $ (2,672) $ (5,301) $ (9,592) $ (15,020)
Mortgage loans held for sale 236,399 9,253 6,113 3,057 1,528 (1,549) (3,146) (6,356) (8,866)
Beneficial interest in Trusts – trading 188,014 298,013 199,029 100,039 50,542 (51,789) (103,365) (189,389) (270,970)
Residual interests in securitizations –
available-for-sale 159,058 32,692 13,543 4,795 2,503 (4,181) (8,798) (17,931) (21,232)
Fixed income – trading (net) 15,609 4,323 2,617 1,174 509 (751) (1,359) (2,368) (3,274)
Interest rate swaps 8,831 (523,639) (344,606) (170,090) (84,500) 83,466 165,791 327,397 484,929
Investments at captive insurance
subsidiary 8,508 1,260 814 395 195 (189) (372) (723) (1,054)
Put options on Eurodollar futures 3,282 – 10 347 1,183 8,549 15,671 31,539 47,955
Forward loan sale commitments 1,961 (158,345) (105,563) (52,782) (26,391) 26,391 52,782 105,563 158,345
Basis Point Change
Carrying Value at
April 30, 2005 – 200 – 100 – 50 + 50 + 100 + 200 + 300
Residual interests in securitizations –
available-for-sale $ 205,936 $ 84,845 $ 30,417 $ 13,637 $ (13,520) $ (28,174) $ (51,466) $ (75,296)
Interest rate caps 12,458 – 205 4,580 20,746 29,262 46,751 64,195
Investments at captive insurance subsidiary 9,968 1,079 522 256 (248) (487) (942) (1,368)
Fixed income – trading (net) 6,252 1,958 893 426 (390) (749) (1,383) (1,921)
Interest rate swaps (1,325) (84,723) (43,024) (19,524) 19,524 43,024 84,723 123,771
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
DISCUSSION OF FINANCIAL RESPONSIBILITY –
We at H&R Block are guided by our core values of client focus, integrity, The Audit Committee of the Board of Directors, composed solely of
excellence, respect and teamwork. These values govern the manner in outside and independent directors, meets periodically with
which we serve clients and each other, and are embedded in the management, the independent auditors and the chief internal auditor to
execution and delivery of our responsibilities to our shareholders. H&R review matters relating to our financial statements, internal audit
Block’s Management is responsible for the integrity and objectivity of activities, internal accounting controls and non-audit services provided
the information contained in this document. Management is responsible by the independent auditors. The independent auditors and the chief
for the consistency of reporting this information and for ensuring that internal auditor have full access to the Audit Committee and meet, both
accounting principles generally accepted in the United States are used. with and without management present, to discuss the scope and results
In discharging this responsibility, Management maintains an extensive of their audits, including internal control, audit and financial matters.
program of internal audits and requires the management teams of our KPMG LLP audited our consolidated financial statements. Their
individual subsidiaries to certify their respective financial information. audits were conducted in accordance with the standards of the Public
Our system of internal control over financial reporting also includes Company Accounting Oversight Board (U.S.).
formal policies and procedures, including a Code of Business Ethics and
Conduct program designed to encourage and assist all employees and
directors in living up to high standards of integrity.
H&R BLOCK 2006 Form 10K
39