HR Block 2012 Annual Report Download - page 78

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The total fair value of both types of share units vesting during fiscal years 2012, 2011 and 2010 was $2.9
million, $1.7 million and $3.1 million, respectively. Upon the grant of both types of nonvested share units,
unearned compensation cost is recorded as an offset to additional paid-in capital and is amortized as
compensation expense over the vesting period. As of April 30, 2012, we had $1.9 million of total unrecognized
compensation cost related to these units. This cost is expected to be recognized over a weighted-average period
of two years.
We utilize the Monte Carlo valuation model to value performance-based nonvested share units on the grant
date. We typically estimate the expected volatility using historical volatility for H&R Block, Inc. and selected
comparable companies. The dividend yield is calculated based on the current dividend and the market price of
our common stock on the grant date. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield
curve in effect on the grant date. Both expected volatility and the risk-free interest rate are based on a period
that approximates the expected term. The following assumptions were used to value performance-based
nonvested share units using the Monte Carlo valuation model during the year ended April 30, 2012:
Expected volatility 20.68% – 143.12%
Expected term 3 years
Dividend yield 0%(1)
Risk–free interest rate 0.75%
Weighted–average fair value $ 17.46
(1) The valuation model assumes that dividends are reinvested by the issuing entity on a continuous basis.
NOTE 15: INCOME TAXES
The components of income from continuing operations upon which domestic and foreign income taxes have
been provided are as follows:
(in 000s)
Year ended April 30, 2012 2011 2010
Domestic $ 547,535 $ 590,024 $ 684,787
Foreign 28,535 37,679 38,627
$ 576,070 $ 627,703 $ 723,414
The components of income tax expense of continuing operations are as follows:
(in 000s)
Year ended April 30, 2012 2011 2010
Current:
Federal $ 126,773 $ 171,337 $ 95,473
State 21,285 40,433 23,674
Foreign 8,647 21,456 16,331
156,705 233,226 135,478
Deferred:
Federal 55,032 (1,762) 104,606
State 18,154 3,404 28,035
Foreign 211 288 172
73,397 1,930 132,813
Total income taxes for continuing operations $ 230,102 $ 235,156 $ 268,291
64
H&R BLOCK 2012 Form 10K