HR Block 2014 Annual Report Download - page 80

72 2014 Form 10-K | H&R Block, Inc.
NOTE 15: INTEREST INCOME AND INTEREST EXPENSE
The following table shows the components of interest income and expense of continuing operations:
(in 000s)
Year ended April 30, 2014 2013 2012
Interest income:
Emerald Advance lines of credit $ 56,877 $ 59,657 $ 59,660
Mortgage loans, net 13,810 16,556 20,322
Loans to franchisees 9,494 10,023 10,234
AFS securities 9,664 7,000 4,463
Other 8,249 5,593 5,121
$ 98,094 $ 98,829 $ 99,800
Interest expense:
Borrowings $ 55,279 $ 74,297 $ 84,782
Deposits 2,109 5,660 6,735
FHLB advances —— 572
$ 57,388 $ 79,957 $ 92,089
NOTE 16: COMMITMENTS AND CONTINGENCIES
We offer guarantees under our POM program to tax clients whereby we (1) represent our clients if they are audited
by the IRS, and (2) assume the cost, up to a cumulative per client limit of $5,500, of additional taxes owed by a client
resulting from errors attributable to H&R Block. We defer all revenues and direct costs associated with these
guarantees, recognizing these amounts over the term of the guarantee based on actual claims paid in relation to
projected claims. The related current asset is included in prepaid expenses and other current assets. The related
liability is included in accounts payable, accrued expenses and other current liabilities in the consolidated balance
sheets. The related noncurrent asset and liability are included in other assets and other noncurrent liabilities,
respectively, in the consolidated balance sheets. A loss on these POM guarantees would be recognized if the sum of
expected costs for services exceeded unearned revenue. Changes in the related balance of deferred revenue are as
follows:
(in 000s)
Year ended April 30, 2014 2013
Balance, beginning of the year $ 146,286 $ 141,080
Amounts deferred for new guarantees issued 88,636 76,561
Revenue recognized on previous deferrals (89,685) (71,355)
Balance, end of the year $ 145,237 $ 146,286
We accrued $11.4 million and $18.0 million as of April 30, 2014 and 2013, respectively, related to estimated losses
under our standard guarantee, which is included with our standard in-office tax preparation services. The current
portion of this liability is included in accounts payable, accrued expenses and other current liabilities and the long-
term portion is included in other noncurrent liabilities in the consolidated balance sheets.
We have accrued estimated contingent consideration payments totaling $9.2 million and $11.3 million as of April 30,
2014 and 2013, respectively, related to acquisitions, with the short-term amount recorded in accounts payable, accrued
expenses and other current liabilities and the long-term portion included in other noncurrent liabilities. Estimates of
contingent payments are typically based on expected financial performance of the acquired business and economic
conditions at the time of acquisition. Should actual results differ from our assumptions, future payments made will
differ from the above estimate and any differences will be recorded in results from continuing operations.
We have contractual commitments to fund certain franchises with approved revolving lines of credit. Our total
obligation under these lines of credit was $90.6 million as of April 30, 2014, and net of amounts drawn and outstanding,
our remaining commitment to fund totaled $45.3 million.