HR Block 2016 Annual Report Download - page 54

46 2016 Form 10-K | H&R Block, Inc.
loans held for investment and various other investments as revenues. Effective September 1, 2015, these amounts
are prospectively reported in other income on the consolidated statements of income and comprehensive income.
ADVERTISING EXPENSE – Advertising costs for radio and television ads are expensed over the course of the tax
season, with print and mailing advertising expensed as incurred.
EMPLOYEE BENEFIT PLANS – We have a 401(k) defined contribution plan covering eligible full-time and seasonal
employees following the completion of an eligibility period. Contributions to this plan are discretionary and totaled
$14.3 million, $14.8 million and $11.8 million for continuing operations in fiscal years 2016, 2015 and 2014, respectively.
We have severance plans covering executives and eligible regular full-time or part-time active employees of a
participating employer who incur a qualifying termination. Expenses related to severance benefits of continuing
operations totaled $12.0 million, $6.7 million and $5.2 million in fiscal years 2016, 2015 and 2014, respectively.
FOREIGN CURRENCY TRANSLATION – Translation adjustments principally related to amounts outstanding under
intercompany borrowings, resulted in foreign currency losses of $7.8 million, $5.9 million and $18.2 million in fiscal
years 2016, 2015 and 2014 respectively.
NEW ACCOUNTING PRONOUNCEMENTS – In March 2016, the Financial Accounting Standards Board (FASB) issued
Accounting Standards Update No. 2016-9, "Compensation-Stock Compensation (Topic 718): Improvements to
Employee Share-Based Payment Accounting" (ASU 2016-9), to reduce complexity in accounting standards involving
several aspects of the accounting for employee share-based payment transactions, including the income tax
consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows.
This guidance will be effective for us on May 1, 2017, with early adoption permitted. We are currently evaluating the
impact of ASU No. 2016-9 on our consolidated financial statements.
In February 2016, the FASB issued Accounting Standards Update No. 2016-2, "Leases" (ASU 2016-2), which will
require the recognition of lease assets and lease liabilities by lessees for leases previously classified as operating leases.
ASU 2016-2 also requires additional qualitative and quantitative disclosures related to the nature, timing and
uncertainty of cash flows arising from leases. This guidance will be effective for us on May 1, 2019, with early adoption
permitted, and requires the use of a modified retrospective approach for leases that exist or are entered into after
the beginning of the earliest comparative period in the financial statements. We are currently evaluating the impact
of ASU 2016-2 on our consolidated financial statements, although we expect the impact of this guidance on our
consolidated financial statements could be significant.
In November 2015, the FASB issued Accounting Standards Update No. 2015-17, "Balance Sheet Classification of
Deferred Taxes," (ASU 2015-17) which requires that deferred tax liabilities and assets be classified as noncurrent. We
elected to adopt this guidance as of November 1, 2015, and applied it prospectively. As such, prior periods have not
been adjusted.
In May 2014, the FASB issued Accounting Standards Update No. 2014-09, "Revenue from Contracts with
Customers," (ASU 2014-09) which requires an entity to recognize the amount of revenue to which it expects to be
entitled for the transfer of promised goods or services to customers. This guidance will replace most existing revenue
recognition guidance in U.S. GAAP when it becomes effective. The new standard is effective for us on May 1, 2018.
Early application is not permitted. The standard permits the use of either the retrospective or cumulative effect
transition method. We are evaluating the effect that ASU 2014-09 will have on our consolidated financial statements
and related disclosures. We have not yet selected a transition method nor have we determined the effect of the
standard on our ongoing financial reporting.
NOTE 2: DIVESTITURE OF H&R BLOCK BANK
On August 4, 2015, H&R Block Bank (HRB Bank), Block Financial LLC, the sole shareholder of HRB Bank (Block Financial),
and BofI, received regulatory approvals for a definitive Amended and Restated Purchase and Assumption Agreement
pursuant to which we agreed to sell certain assets and liabilities, including all of the deposit liabilities of HRB Bank,
to BofI (P&A Transaction). On August 31, 2015, we completed the P&A Transaction and made a net cash payment to
BofI of $419 million, which was approximately equal to the carrying value of the liabilities (including all deposit
liabilities) assumed by BofI. In connection with the closing, we sold the available-for-sale (AFS) securities previously
held by HRB Bank.