3. Receivables

Short-term receivables of our continuing operations consist of the following:


						(in 000s)
As of		January 31, 2013		January 31, 2012		April 30, 2012

Emerald Advance lines of credit	$	462,576	$	443,717	$	23,717
Receivables for tax preparation and related fees		250,566		333,636		42,286
Loans to franchisees		110,560		81,415		61,252
Royalties from franchisees		69,627		88,597		5,781
RAC fees receivable		31,680		28,942		-
Receivable from McGladrey & Pullen LLP		-		32,342		-
Other		68,980		91,392		105,411
		993,989		1,100,041		238,447
Allowance for doubtful accounts		(44,829)		(64,139)		(44,589)
	$	949,160	$	1,035,902	$	193,858

The short-term portion of Emerald Advance lines of credit (EAs), loans made to franchisees and credit card balances is included in receivables, while the long-term portion is included in other assets in the consolidated balance sheets. These amounts are as follows:


						(in 000s)
		Emerald Advance		Loans		Credit
		Lines of Credit		to Franchisees		Card Balances

As of January 31, 2013:
Short-term	$	462,576	$	110,560	$	4,220
Long-term		10,465		127,274		16,045
	$	473,041	$	237,834	$	20,265
As of January 31, 2012:
Short-term	$	443,717	$	81,415	$	-
Long-term		15,001		134,136		-
	$	458,718	$	215,551	$	-
As of April 30, 2012:
Short-term	$	23,717	$	61,252	$	-
Long-term		13,007		109,837		-
	$	36,724	$	171,089	$	-

Emerald Advance Lines of Credit. We review the credit quality of our EA receivables based on pools, which are segregated by the year of origination, with older years being deemed more unlikely to be repaid. These amounts as of January 31, 2013, by year of origination, are as follows:


		(in 000s)

2013	$	435,117
2012		6,936
2011		5,992
2010		3,493
2009 and prior		5,073
Revolving loans		16,430
	$	473,041

As of January 31, 2013, January 31, 2012 and April 30, 2012, $30.7 million, $41.4 million and $31.4 million, respectively, of EAs were on non-accrual status and classified as impaired, or more than 60 days past due.

Loans to Franchisees. Loans made to franchisees at January 31, 2013 totaled $237.8 million, and consisted of $144.5 million in term loans and $93.3 million in revolving lines of credit made to existing franchisees primarily for the purpose of funding off-season working capital needs. Loans made to franchisees at January 31, 2012 totaled $215.6 million, and consisted of $150.4 million in term loans and $65.2 million in revolving lines of credit. Loans made to franchisees at April 30, 2012 totaled $171.1 million, and consisted of $127.0 million in term loans and $44.1 million in revolving lines of credit. As of January 31, 2013, we had no loans to franchisees that were past due or on non-accrual status.

Credit Cards. In November 2012, H&R Block Bank, (HRB Bank) began offering unsecured credit cards. These credit cards are offered to selected customers, primarily previous H&R Block clients, based on their credit profile and have a maximum available credit limit of $2,500. Interest income on credit cards is calculated using the average daily balance method and is recognized based on the principal amount outstanding until the outstanding balance is paid or becomes delinquent.

We believe that delinquency rates are the primary indictor of credit quality; however, we also utilize a four-tier approach with Tier 4 representing the most risk. Each tier is comprised of a combination of FICO, Vantage and industry predictive loss models. We do not consider the borrower’s credit score to be a primary indicator since it tends to be a lagging indicator of credit quality. All criteria are evaluated at the time of origination, and are not subsequently updated. Credit card receivable balances as of January 31, 2013, by credit tier, are as follows:



		(in 000s)

Tier 1	$	3,779
Tier 2		8,818
Tier 3		2,660
Tier 4		5,008
	$	20,265

Credit card receivables are evaluated for impairment when they become delinquent. Amounts deemed to be uncollectible are charged-off against the related allowance. As of January 31, 2013, none of these credit card balances were on non-accrual status and classified as impaired, or more than 60 days past due. Payments on past due amounts are recorded as a reduction in the receivable balance.

Allowance for Doubtful Accounts. Activity in the allowance for doubtful accounts for the nine months ended January 31, 2013 and 2012 is as follows:


								(in 000s)
		Balance as of						Balance as of
		April 30, 2012		Provision		Charge-offs		January 31, 2013

Emerald Advance lines of credit	$	6,200	$	25,519	$	-	$	31,719
Loans to franchisees		-		42		-		42
Credit cards		-		4,255		-		4,255
All other receivables		38,389		10,666		(40,242)		8,813
	$	44,589	$	40,482	$	(40,242)	$	44,829

		Balance as of						Balance as of
		April 30, 2011		Provision		Charge-offs		January 31, 2012

Emerald Advance lines of credit	$	4,400	$	33,570	$	-	$	37,970
Loans to franchisees		-		-		-		-
Credit cards		-		-		-		-
All other receivables		43,543		17,062		(34,436)		26,169
	$	47,943	$	50,632	$	(34,436)	$	64,139

We recorded an allowance for credit card receivables equal to 21% of amounts outstanding, based on industry information for similar credit cards. We will adjust our allowance in the future as payment and delinquency trends become available.

There were no changes to our methodology related to the calculation of our allowance for doubtful accounts during the nine months ended January 31, 2013.