H&R BLOCK INC Fair Value Disclosure
▪ | 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. |
(in 000s) | ||||||||||||||||||
As of April 30, | 2018 | 2017 | Fair Value Hierarchy | |||||||||||||||
Carrying Amount | Estimated Fair Value | Carrying Amount | Estimated Fair Value | |||||||||||||||
Assets: | ||||||||||||||||||
Cash and cash equivalents | $ | 1,544,944 | $ | 1,544,944 | $ | 1,011,331 | $ | 1,011,331 | Level 1 | |||||||||
Cash and cash equivalents - restricted | 118,734 | 118,734 | 106,208 | 106,208 | Level 1 | |||||||||||||
Receivables, net - short-term | 146,774 | 146,774 | 162,775 | 162,775 | Level 1 | |||||||||||||
Receivables, net - long-term | 52,434 | 52,434 | 52,898 | 52,898 | Level 1 and 3 | |||||||||||||
Liabilities: | ||||||||||||||||||
Long-term debt (excluding debt issuance costs) | — | 1,548,121 | 1,502,735 | 1,569,033 | Level 2 | |||||||||||||
Contingent consideration | 12,060 | 12,060 | 10,428 | 10,428 | Level 3 | |||||||||||||
▪ | 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. |
▪ | 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. |
▪ | Long-term debt - The fair value of our Senior Notes is based on quotes from multiple banks. |
▪ | Contingent consideration - Fair value approximates the carrying amount. |
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2018 | Jun 15, 2018 | Showing above |
| 2017 | Jun 16, 2017 | |
| 2016 | Jun 17, 2016 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.