NOTE 7: FAIR VALUE

ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS – The carrying amounts and estimated fair values of our financial instruments are as follows:



(in 000s)
As of	October 31, 2016				October 31, 2015				April 30, 2016
	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Assets:
Cash and cash equivalents	$	232,510	$	232,510	$	360,681	$	360,681	$	896,801	$	896,801
Cash and cash equivalents - restricted	109,538		109,538		42,781		42,781		104,110		104,110
Receivables, net - short-term	104,764		104,764		94,760		94,760		153,116		153,116
Mortgage loans held for sale	183,107		195,432		—		—		—		—
Mortgage loans held for investment, net	—		—		220,671		180,437		202,385		190,503
Receivables, net - long-term	56,238		56,238		75,275		75,275		60,407		60,407
Liabilities:
Long-term debt and line of credit borrowings	1,968,109		2,067,234		1,491,322		1,553,633		1,492,201		1,566,098
Contingent consideration	7,817		7,817		11,932		11,932		8,657		8,657

Fair value estimates, methods and assumptions are set forth below. 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 (Level 1).


▪	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 (Level 1).

▪

Mortgage loans held for sale - The fair value is based on indicative bids received from prospective buyers and is based on estimated valuations of unpaid principal balances (Level 2). These loans were previously reported as held for investment with the related fair value determined as outlined below (Level 3). In accordance with plans approved by our Board of Directors, these loans are now presented as held for sale.

▪

Mortgage loans held for investment, net - The fair value of mortgage loans held for investment is estimated using a third-party pricing service. The fair value is determined using the present value of expected future cash flows at the asset level, assuming future prepayments and using discount factors determined by prices obtained for residential loans with similar characteristics in the secondary market, as discounted for illiquid assets. Quarterly, we perform analytics to assess the reasonableness of the fair value received from the third-party pricing service based on changes in the portfolio and changes in market conditions. We evaluate whether adjustments to third-party pricing is necessary and historically, we have not made adjustments to prices obtained from our third-party pricing service (Level 3).

▪

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 (Level 2). For outstanding balances on the 2016 CLOC, fair value approximates the carrying amount (Level 1).


▪	Contingent consideration - Fair value approximates the carrying amount (Level 3).