NOTE 2: REVENUE RECOGNITION

On May 1, 2018, we adopted ASU 2014-09 using the full retrospective approach for all contracts as of the adoption date. As the adoption of this guidance did not have a significant impact on our consolidated financial statements, no adjustments were made to the prior year periods to be in compliance with ASU 2014-09.

Revenue is recognized upon satisfaction of performance obligations by the transfer of a product or service to the customer. Revenue is the amount of consideration we expect to receive for our services and products and excludes sales taxes. The majority of our products and services have multiple performance obligations. For our tax preparation services, the various performance obligations are generally provided simultaneously at a point in time, and revenue is recognized at that time. We have certain services and products where we have multiple performance obligations that are provided at various points in time. For these services and products, we allocate the transaction price to the various performance obligations based on relative standalone selling prices and recognize the revenue when the respective performance obligations have been satisfied. We have determined that our contracts do not contain a significant financing component.

The majority of our revenues are from our U.S. business. The following table disaggregates our U.S. revenues by

major service line, with all international businesses included in a single line, which consists primarily of tax preparation revenues:



					(in 000s)
Year ended April 30,	2019		2018		2017
Revenues:
U.S. assisted tax preparation	$	1,858,998	$	1,947,160	$	1,902,212
U.S. royalties	243,541		245,444		250,270
U.S. DIY tax preparation	260,082		243,159		219,123
International revenues	220,562		227,266		210,320
Revenues from Refund Transfers	169,985		171,959		148,212
Revenues from Emerald Card®	98,256		102,640		95,221
Revenues from Peace of Mind® Extended Service Plan	108,114		101,572		92,820
Revenues from Tax Identity Shield®	35,661		28,823		21,054
Interest and fee income on Emerald Advance^TM	58,182		56,986		57,022
Other	41,500		34,922		40,060
Total revenues	$	3,094,881	$	3,159,931	$	3,036,314

Assisted tax preparation revenues are recorded when a completed return is electronically filed or accepted by the customer. The value of point-of-sale discounts and coupons are recorded as a reduction of revenue.

Royalties are based on contractual percentages of franchise gross receipts and are generally recorded in the period in which the services are provided by the franchisee to the customer.

DIY tax preparation revenues consist of online tax preparation fees, desktop software and fees for electronic filing.


▪	Online tax preparation revenues are recorded when a completed return is electronically filed or accepted by the customer.


▪	Revenue from the sale of DIY desktop software is recognized when the product is sold to the end user. Rebates and other incentives paid in connection with these sales are recorded as a reduction of revenue.


▪	Fees for electronic filing of tax returns are recorded when the return is electronically filed.

Revenues from Refund Transfers are recognized when the Internal Revenue Service (IRS) acknowledgment is received and the bank account is established at Axos Bank, formerly known as BofI Federal Bank, a federal savings bank (Axos).

Revenues from Emerald Card® consists of interchange income from the use of debit cards and fees from the use of ATM networks, net of volume-based amounts retained by Axos in connection with our agreement. Interchange income is a fee paid by a merchant bank to Axos through the interchange network. Net revenue associated with our Emerald Card® is recognized based on cardholder transactions.

Revenues from Peace of Mind® Extended Service Plan (POM) are initially deferred and recognized over the term of the plan, based on the historical pattern of actual claims paid, as claims paid represent the transfer of POM services to the customer. The plan is effective for the life of the tax return, which can be up to six years; however, the majority of claims are incurred in years two and three after the sale of POM. POM has multiple performance obligations where we represent our clients if they are audited by a taxing authority, and assume the cost, subject to certain limits, of additional taxes owed by a client resulting from errors attributable to H&R Block. Incremental wages are also deferred and recognized over the term of the plan.

Changes in the balances of deferred revenue and wages for POM are as follows:



										(in 000s)
POM	Deferred Revenue						Deferred Wages
Year ended April 30,	2019			2018			2019			2018
Balance, beginning of the year	$	218,274		$	211,223		$	32,683		$	31,344
Amounts deferred	120,163			122,650			13,336			18,148
Amounts recognized on previous deferrals	(125,926		)	(115,599		)	(18,713		)	(16,809		)
Balance, end of the year	$	212,511		$	218,274		$	27,306		$	32,683

As of April 30, 2019, deferred revenue related to POM was $212.5 million. We expect that $119.2 million will be recognized over the next twelve months, while the remaining balance will be recognized over the following sixty months. The related liabilities are included in deferred revenue and other liabilities in the consolidated balance sheets. The related assets are included in prepaid expenses and other current assets or other noncurrent assets.

Revenues from Tax Identity Shield (TIS) are initially deferred and are recognized as the various services are provided to the client, either by us or a third party, throughout the term of the contract, which ends on April 30th of the following year. TIS has multiple performance obligations where we provide clients assistance in helping protect their tax identity and access to services to help restore their tax identity, if necessary. Protection services include a daily scan of the dark web for personal information, a monthly scan for social security number in credit header data (new in fiscal year 2019), a pre-tax season identity theft risk assessment (only available to clients having returns prepared in retail offices), notifying clients if their information is detected on a tax return filed through H&R Block, and obtaining additional IRS identity protections when eligible.

As of April 30, 2019, and 2018, TIS deferred revenue was $29.7 million and $36.4 million, respectively. The related liabilities are included in deferred revenue and other current liabilities in the consolidated balance sheets. All deferred revenue related to TIS as of April 30, 2019 will be recognized within the next twelve months. All amounts deferred as of April 30, 2018 were recognized as revenues in the fiscal year ended April 30, 2019.

Interest and fee income on Emerald Advance^TMlines of credit (EAs) is recorded over the life of the underlying loan.

Service revenues consist of assisted and online tax preparation revenues, fees for electronic filing, revenues from RTs, Emerald Card, POM and TIS.

A significant portion of our accounts receivable balances arise from services and products that we provide to our customers, with the exception of those related to EAs, which arise from purchased participation interests with Axos. The majority of our services and products must be paid for at the time of service, and therefore no receivable is recorded unless an RT is purchased. Generally the prices of our services and products are fixed and determinable at the time of sale. For our RT product, we record a receivable for our fees which is then collected at the time the IRS issues the client’s refund. Our receivables from customers are generally collected on a periodic basis during and subsequent to the tax season. See note 4 for our accounts receivable balances.