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64 2014 Form 10-K | H&R Block, Inc.
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, 2014 2013
Carrying
Amount Estimated
Fair Value Carrying
Amount Estimated
Fair Value Fair Value
Hierarchy
Assets:
Cash and cash equivalents $ 2,185,307 $ 2,185,307 $ 1,747,584 $ 1,747,584 Level 1
Cash and cash equivalents - restricted 115,319 115,319 117,837 117,837 Level 1
Receivables, net - short-term 191,618 191,618 206,835 206,810 Level 1
Mortgage loans held for investment, net 268,428 192,281 338,789 210,858 Level 3
Investments in AFS securities 427,824 427,824 486,876 486,876 Level 2
Receivables, net - long-term 104,678 104,678 125,048 134,283 Level 1 and 3
Liabilities:
Customer banking deposits 770,288 765,376 938,331 934,019 Level 1 and 3
Long-term debt 906,474 955,050 906,680 964,630 Level 2
Contingent consideration payments 9,206 9,206 11,277 11,277 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 determined
using market pricing sources based on projected future cash flows of each individual asset, and loan
characteristics including channel and performance characteristics.
Investments in AFS 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.
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.