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Fair Value Measurement | 12 Months Ended
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Apr. 30, 2014
Fair Value Disclosures [Abstract] |
Fair Value Measurement | FAIR VALUE MEASUREMENT – We use the following classification of financial instruments pursuant to the fair value hierarchy methodologies for assets measured at fair value:
▪ | Level 1 – inputs to the valuation are quoted prices in an active market for identical assets.
▪ | Level 2 – inputs to the valuation include quoted prices for similar assets in active markets utilizing a third-party pricing service to determine fair value.
▪ | Level 3 – valuation is based on significant inputs that are unobservable in the market and our own estimates of assumptions that we believe market participants would use in pricing the asset.
Assets measured on a recurring basis are initially measured at fair value and are required to be remeasured at fair value in the financial statements at each reporting date. Our investments in mortgage-backed securities and municipal bonds are carried at fair value on a recurring basis with gains and losses reported as a component of other comprehensive income, except for losses assessed to be other than temporary. These include certain agency and agency-sponsored mortgage-backed securities and municipal bonds. Quoted market prices are not available for these securities, as they are not actively traded and have fewer observable transactions. As a result, we use third-party pricing services to determine fair value and classify the securities as Level 2. The third-party pricing services' models are based on market data and utilize available trade, bid and other market information for similar securities. There were no transfers of AFS securities between hierarchy levels during the fiscal years ended April 30, 2014 and 2013. See note 6 for details of our AFS securities that were remeasured at fair value on a recurring basis during the fiscal years ended April 30, 2014 and 2013 and the gains or losses on those remeasurements. Assets measured on a nonrecurring basis are assets that, as a result of an event or circumstance, were required to be remeasured at fair value after initial recognition in the financial statements at some time during the reporting period. The following table presents the assets that were remeasured at fair value on a non-recurring basis during the fiscal years ended April 30, 2014 and 2013 and the losses on those remeasurements:
(dollars in 000s) |
|  | Total |  |  | Level 1 |  |  | Level 2 |  |  | Level 3 |  |  | Losses |
As of April 30, 2014: |  |  |  |  |  |  |  |  |  |
Impaired mortgage loans held for investment |  | $ | 69,131 |  |  | $ | — |  |  | $ | — |  |  | $ | 69,131 |  |  | $ | (3,739 | )
As a percentage of total assets |  | 1.5 | % |  | — |  |  | — |  |  | 1.5 | % |  |
As of April 30, 2013: |  |  |  |  |  |  |  |  |  |
Impaired mortgage loans held for investment |  | $ | 84,708 |  |  | $ | — |  |  | $ | — |  |  | $ | 84,708 |  |  | $ | (10,663 | )
As a percentage of total assets |  | 1.9 | % |  | — |  |  | — |  |  | 1.9 | % |  |
The fair value of impaired mortgage loans held for investment is generally based on the net present value of discounted cash flows for TDR loans or the appraised value of the underlying collateral for all other loans. Impaired and TDR loans are required to be remeasured at least annually, based on HRB Bank's loan policy. These loans are classified as Level 3. We have established various controls and procedures to ensure that the unobservable inputs used in the fair value measurement of these instruments are appropriate. Appraisals are obtained from certified appraisers and reviewed internally by HRB Bank's asset management group. The inputs and assumptions used in our discounted cash flow model for TDRs are reviewed and approved by HRB Bank management each time the balances are remeasured. Significant changes in fair value from the previous measurement are presented to HRB Bank management for approval. There were no changes to the unobservable inputs used in determining the fair values of our Level 3 financial assets. The following table presents the quantitative information about our Level 3 fair value measurements, which utilize significant unobservable internally-developed inputs:
(dollars in 000s)
|  | Fair Value at April 30, 2014 |  |  | Valuation Technique |  | Unobservable Input |  | Range (Weighted Average)
Impaired mortgage loans held for investment - non TDRs |  | $ | 72,644 |  |  | Collateral- based |  | Cost to list/sell Time to sell (months) Collateral depreciation Loss severity |  | 0% – 185%(9%) 24(24) (166%) – 100%(50%) 0% – 100%(64%)
Impaired mortgage loans held for investment - TDRs |  | $ | 39,519 |  |  | Discounted cash flow |  | Aged default performance Loss severity |  | 24% – 39%(32%) 0% – 22%(6%)
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.

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- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=28364263&loc=d3e13537-108611 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 10 -URI http://asc.fasb.org/extlink&oid=28364263&loc=d3e13433-108611 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 28 -URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14064-108612 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=25499696&loc=d3e19207-110258 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 30 -URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14172-108612 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 16 -URI http://asc.fasb.org/extlink&oid=28364263&loc=d3e13504-108611 + Details
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