HR Block 2009 Annual Report Download - page 54

쐍Software revenues consist mainly of tax preparation software and other personal productivity software.
Revenue from the sale of software such as TaxCut»is recognized when the product is sold to the end user,
either through retail, online or other channels. Rebates, slotting fees and other incentives paid in connection
with these sales are recorded as a reduction of revenue. Revenue from the sale of TaxWorks»software is
deferred and recognized over the period for which upgrades and support are provided to the customer.
Revenue recognition is evaluated separately for each unit in multiple-deliverable arrangements. Sales tax we
collect and remit to taxing authorities is recorded net in our consolidated income statements.
ADVERTISING EXPENSE –Advertising costs are primarily expensed as incurred, or the first time the
advertisement takes place. Total advertising costs of continuing operations for fiscal years 2009, 2008 and
2007 totaled $249.2 million, $204.8 million and $213.9 million, respectively.
DEFINED CONTRIBUTION PLANS –We have 401(k) defined contribution plans covering all full-time and
seasonal employees following the completion of an eligibility period. Contributions of our continuing operations
to these plans are discretionary and totaled $26.7 million, $27.3 million and $23.3 million for fiscal years 2009, 2008
and 2007, respectively.
FOREIGN CURRENCY TRANSLATION –Assets and liabilities of foreign subsidiaries are translated into
U.S. dollars at exchange rates prevailing at the end of the year. Revenues and expenses of our foreign
operations are translated at the average exchanges rates in effect during the fiscal year. Translation
adjustments are recorded as a separate component of other comprehensive income in stockholders’ equity.
COMPREHENSIVE INCOME –Our comprehensive income (loss) is comprised of net income (loss), foreign
currency translation adjustments and the change in net unrealized gains or losses on AFS marketable securities.
Included in stockholders’ equity at April 30, 2009 and 2008, the net unrealized holding gain on AFS securities was
$(1.5) million and $5.5 million, respectively, and the foreign currency translation adjustment was $13.1 million and
$(3.0) million, respectively. Translation adjustments recorded in fiscal year 2009 totaled $10.1 million, and are net
of income taxes of $4.1 million.
NEW ACCOUNTING STANDARDS –In June 2008, FASB Staff Position on EITF 03-6-1, “Determining Whether
Instruments Granted in Share-Based Payment Transactions are Participating Securities” (FSP 03-6-1) was issued.
FSP 03-6-1 addresses whether instruments granted in share-based payment transactions are participating
securities prior to vesting and, therefore, should be included in the process of allocating earnings for
purposes of computing earnings per share. This guidance is effective for financial statements issued for fiscal
years and the related interim periods beginning after December 15, 2008. Early application is not permitted. The
provisions of FSP 03-6-1 are effective for the first quarter of our fiscal year 2010. We do not expect the adoption of
FSP 03-6-1 will have a material effect on our consolidated financial statements.
In December 2007, Statement of Financial Accounting Standards No. 141(R), “Business Combinations,”
(SFAS 141R) and Statement of Financial Accounting Standards No. 160, “Non-Controlling Interests in
Consolidated Financial Statements – An Amendment of ARB No. 51” (SFAS 160) were issued. These standards
will require an acquiring entity to recognize all the assets acquired and liabilities assumed in a transaction,
including non-controlling interests, at the acquisition date fair value with limited exceptions. SFAS 141R will
further require acquisition-related expenses to be expensed and will generally require contingent consideration be
recorded as a liability at the time of acquisition. Under SFAS 141R, subsequent changes to deferred tax valuation
allowances relating to acquired businesses and acquired liabilities for uncertain tax positions will no longer be
applied to goodwill but will instead be typically recognized as an adjustment to income tax expense. The
provisions of these standards are effective as of the beginning of our fiscal year 2010. We do not expect the
adoption of SFAS 141R and SFAS 160 will have a material effect on our consolidated financial statements.
As discussed in note 15, we adopted Statement of Financial Accounting Standards No. 157, “Fair Value
Measurements” (SFAS 157) and Statement of Financial Accounting Standards No. 159, “The Fair Value Option
for Financial Assets and Financial Liabilities” (SFAS 159) as of May 1, 2008, and FASB Staff Position No. 115-2 and
124-2, “Recognition and Presentation of Other-Than-Temporary Impairments” (FSP 115-2) as of April 30, 2009.
NOTE 2: BUSINESS COMBINATIONS AND DISPOSALS
Effective November 3, 2008, we acquired the assets and franchise rights of our last major independent franchise
operator for an aggregate purchase price of $279.2 million. Results related to the acquired business have been
included in our consolidated financial statements since November 3, 2008. Pro forma results of operations have
not been presented as the effects of this acquisition were not material to our results. Goodwill recognized on this
50 H&R BLOCK 2009 Form 10K