Nature of Operations and Significant Accounting Policies

Apollo Education Group, Inc. is one of the world’s largest private education services providers, serving students since 1973. Through our subsidiaries, we offer undergraduate, graduate, professional development and other non-degree educational programs and services, online and on-campus, principally to working learners in the U.S. and abroad. Refer to Note 18, Segment Reporting, for further information regarding our education platforms.

During fiscal year 2014, Apollo changed its name from Apollo Group, Inc. to Apollo Education Group, Inc.

Our fiscal year is from September 1 to August 31. Unless otherwise stated, references to particular years or quarters refer to our fiscal years and the associated quarters of those fiscal years.

Basis of Presentation

These consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

Use of Estimates

The preparation of financial statements in accordance with GAAP requires management to make certain estimates and assumptions that affect the reported amount of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results may differ from these estimates.

Principles of Consolidation

The consolidated financial statements include the assets, liabilities, revenues and expenses of Apollo Education Group, Inc., our wholly-owned subsidiaries, and other subsidiaries that we control. We eliminate intercompany transactions and balances in consolidation.

We record noncontrolling interests in our consolidated financial statements to recognize the noncontrolling ownership interest in our consolidated subsidiaries. A portion of the net income (loss) of such subsidiaries is allocated to our noncontrolling interests generally based on the respective noncontrolling shareholder’s ownership interest in the consolidated subsidiary. Depending on the nature of the noncontrolling interest and the associated rights of the noncontrolling shareholders, we present noncontrolling interests either as a component of equity or separately as redeemable noncontrolling interests on our Consolidated Balance Sheets.

For redeemable noncontrolling interests that are either redeemable or probable of becoming redeemable, we record the noncontrolling interests at the greater of the carrying value or the redemption value at the end of each reporting period. We determine the redemption value by assuming the end of each reporting period is the redemption date. Redemption value adjustments are recorded through retained earnings. Refer to Note 13, Shareholders’ Equity and Redeemable Noncontrolling Interests.

Revenue Recognition

Substantially all of our net revenue is composed of tuition and fees from educational programs that range in length from one-day seminars to degree and non-degree programs lasting multiple years. University of Phoenix represents the substantial majority of our total consolidated net revenue and substantially all of the University’s net revenue is generated from degree programs. University of Phoenix students fund their education through loans and/or grants from U.S. federal financial aid programs established by Title IV of the Higher Education Act and regulations promulgated thereunder (“Title IV”), military benefit programs, tuition assistance from their employers, or personal funds.

Our net revenue generally varies from period to period based on several factors, including the aggregate number of students attending educational programs, the number of programs or classes held during the period, and the tuition price per program. We recognize revenue when persuasive evidence of an arrangement exists, services have been rendered or delivery has occurred, our fee or price to the customer is fixed or determinable, and collectibility is reasonably assured. The following summarizes the components of our net revenue, which are generally consistent on a percentage basis for all periods presented:

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Tuition and educational services represents approximately 92% of our gross consolidated revenue, and encompasses all educational delivery modalities (i.e., online, on-campus, etc.). We recognize tuition and educational services revenue over the period of instruction as services are delivered to students, which may vary depending on the program structure. Tuition benefits for our employees and their eligible dependents are included in tuition and educational services revenue and instructional and student advisory expenses, and were $32.3 million, $53.4 million and $71.1 million during fiscal years 2014, 2013 and 2012, respectively.

Under University of Phoenix’s non-term academic delivery model, students generally enroll in a program of study encompassing a series of five- to nine-week courses taken consecutively over the length of the program. Students are billed separately for each course when the student first attends a course, resulting in the recording of a receivable from the student and deferred revenue in the amount of the billing. The University generally recognizes revenue evenly over the period of instruction (e.g., five weeks for a five-week course) as services are delivered to the student. For students that participate in the University’s risk-free, three-week program during their first credit-bearing course, the University does not recognize revenue for the risk-free period until students decide to continue beyond the risk-free period, which is when the fees become fixed and determinable. Additionally, the University reassesses collectibility throughout the period revenue is recognized when there are changes in facts or circumstances that indicate collectibility is no longer reasonably assured.

University of Phoenix’s refund policy permits students who attend 60% or less of a course to be eligible for a refund for the portion of the course they did not attend. Accordingly, the University ceases revenue recognition for the remainder of a course if a student withdraws prior to the tuition refund period elapsing, and refunds result in a reduction of deferred revenue in the period that a student withdraws. This refund policy applies to students in most, but not all states, as some states require different policies.

For our Apollo Global operations, tuition revenue is generally recognized over the length of the course and/or program. However, we recognize revenue associated with Open Colleges’ educational offerings over the contract period that students are provided access to complete their online, asynchronous program or the period of time it takes students to complete their program, as applicable. As a result, revenue recognition for Open Colleges’ educational offerings generally extends beyond one year.

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Educational materials represents approximately 7% of our gross consolidated revenue, and encompasses online course materials delivered to students over the period of instruction and the sale of various books, study texts, course notes, and CDs. We recognize revenue associated with online materials over the period of the related course to correspond with delivery of the materials to students. We recognize revenue for the sale of other educational materials when they have been delivered to and accepted by students or other customers.


•	Other represents approximately 1% of our gross consolidated revenue, and includes net revenue generated by Carnegie Learning, fees students pay when submitting an enrollment application and non-tuition generating revenues such as renting classroom space.


•	Discounts reflect reductions in charges for tuition or other fees from our standard rates and include military, corporate, and other employer discounts, along with institutional scholarships, grants and promotions. Discounts are generally recognized over the period of instruction in the same manner as the related revenue to which the discount relates.

During fiscal year 2014, we began presenting Institute of Professional Development’s (“IPD”) operating results as discontinued operations. Accordingly, IPD’s net revenue is included in discontinued operations on our Consolidated Statements of Income for all periods presented. IPD’s revenue was generated based on fixed fee contracts with IPD client institutions and was recognized in accordance with the terms of the respective agreements as services were provided.

Sales tax collected from students is excluded from net revenue. Collected but unremitted sales tax is included as a liability on our Consolidated Balance Sheets and is not material to our consolidated financial statements.

Allowance for Doubtful Accounts

We reduce our accounts receivable by an allowance for amounts that we expect to be uncollectible. We use estimates that are subjective and require judgment in determining the allowance for doubtful accounts, and estimates may vary depending on the institution or educational program that generated the accounts receivable. In general, our estimates are based on historical collection experience and write-offs, the aging of our receivables, and current trends. Our accounts receivable are written off once the account is deemed to be uncollectible, which typically occurs after outside collection agencies have pursued collection for approximately six months.

For our Title IV eligible institutions, program participation rules determine if we are required to return a portion of the funds to the U.S. Department of Education when a student with Title IV program loans withdraws. We are then entitled to collect these funds from the students, but collection rates for these types of receivables are significantly lower than our collection rates for receivables from students who remain in our educational programs.

We estimate our allowance for doubtful accounts for University of Phoenix’s receivables using a statistical model that considers a number of factors that we believe impact whether receivables will become uncollectible based on our collections experience. These factors include, but are not limited to, the student’s academic performance and previous college experience as well as other student characteristics such as credit hours earned and method of payment. We also monitor and consider external factors such as changes in the economic and regulatory environment.

We routinely evaluate our estimation methodologies for all our institutions and educational programs for adequacy and modify them as necessary. In doing so, we believe our allowance for doubtful accounts reflects the amount of receivables that will become uncollectible by considering our most recent collections experience, changes in trends and other relevant facts. Refer to Note 6, Accounts Receivable, Net.

Cash and Cash Equivalents

We consider all highly liquid investments with stated maturities of three months or less from the date we purchase the investment to be cash equivalents. Cash and cash equivalents generally include money market funds, bank overnight deposits and time deposits, which are all placed with high-credit-quality financial institutions in the U.S. and internationally. Only a negligible portion of these deposits are insured by the Federal Deposit Insurance Corporation. We have not experienced any losses on our cash and cash equivalents.

Restricted Cash and Cash Equivalents

Restricted cash and cash equivalents primarily represents funds held for students for unbilled educational services that were received from Title IV program funds. As a trustee of these Title IV program funds, we are required to maintain and restrict these funds pursuant to the terms of our program participation agreement with the U.S. Department of Education. Restricted cash and cash equivalents are excluded from cash and cash equivalents on our Consolidated Balance Sheets and Consolidated Statements of Cash Flows. Changes in restricted cash and cash equivalents that represent funds held for students as described above are included in cash flows from operating activities on our Consolidated Statements of Cash Flows because these restricted funds are a core activity of our operations. Our restricted cash and cash equivalents are primarily held in money market funds.

Marketable Securities

We invest our excess cash in instruments that may include tax-exempt municipal bonds, corporate bonds, time deposits, commercial paper, agency bonds and other marketable securities. We present such instruments with original maturities to us greater than three months as marketable securities on our Consolidated Balance Sheets, and we classify our marketable securities as either current or noncurrent based on each instrument’s contractual maturity. Securities with maturities of twelve months or less are classified as current, and securities with maturities greater than twelve months are classified as noncurrent.

We determine the designation of our marketable securities as held-to-maturity or available-for-sale at the time of purchase and reevaluate such designation at the end of each period. Securities are designated as held-to-maturity if we have intent and ability to hold them until maturity, and such securities are reported at amortized cost. If we do not have the intent or ability to hold securities until maturity, they are designated as available-for-sale. Available-for-sale securities are reported at fair value with changes in fair value reflected in shareholders’ equity as a component of accumulated other comprehensive loss. We determine any realized gains or losses on the sale of marketable securities using the specific identification method, and they are included in other (loss) income, net on our Consolidated Statements of Income. Refer to Note 5, Financial Instruments.

Property and Equipment, Net

Property and equipment is recorded at cost less accumulated depreciation. Property and equipment under capital leases, and the related obligation, is recorded at an amount equal to the present value of future minimum lease payments. Buildings, furniture, equipment, and software, including internally developed software, are depreciated using the straight-line method over the estimated useful lives of the related assets, which range from 3 to 40 years. Capital leases, leasehold improvements and tenant improvement allowances are amortized using the straight-line method over the shorter of the lease term or the estimated useful lives of the related assets. Construction in progress, excluding software, is recorded at cost until the corresponding asset is placed into service and depreciation begins. Software is recorded at cost and is amortized once the related asset is ready for its intended use. Maintenance and repairs are expensed as incurred.

We capitalize certain internal software development costs consisting primarily of the direct labor associated with creating the internally developed software. Capitalized costs are amortized using the straight-line method over the estimated lives of the software. Software development projects generally include three stages: the preliminary project stage (all costs expensed as incurred), the application development stage (certain costs capitalized, certain costs expensed as incurred), and the post-implementation/operation stage (all costs expensed as incurred). The costs we capitalize in the application development stage primarily include the costs of designing the application, coding, installation of hardware, and testing. Refer to Note 7, Property and Equipment, Net.

Business Combinations

We include the results of operations of businesses we acquire from the date of the respective acquisition. We allocate the purchase price of acquisitions to the assets acquired and liabilities assumed at fair value. The excess of the purchase price of an acquired business over the amount assigned to the assets acquired and liabilities assumed is recorded as goodwill. Transaction costs incurred in connection with business combinations are expensed as incurred.

Goodwill and Intangibles

Goodwill represents the excess of the purchase price of an acquired business over the amount assigned to the assets acquired and liabilities assumed. We allocate assets acquired, including goodwill, and liabilities assumed in business combinations to our respective reporting units. We identify our reporting units by assessing whether the components of our operating segments constitute businesses for which discrete financial information is available and segment management regularly reviews the operating results of those components.

Our intangibles principally include trademarks, technology, regulatory accreditations and designations, course curriculum and customer relationships. We assign indefinite lives to intangibles that we believe have the continued ability to generate cash flows indefinitely; have no legal, regulatory, contractual, economic or other factors limiting the useful life of the respective intangible; and we intend to renew the respective intangible, if applicable, and renewal can be accomplished at little cost. Finite-lived intangibles are amortized on either a straight-line basis or using an accelerated method to reflect the pattern in which the economic benefits of the asset are consumed. The weighted average original useful life of our $74.7 million of finite-lived intangibles as of August 31, 2014 was 5.8 years.

We assess goodwill and indefinite-lived intangibles at least annually for impairment or more frequently if events occur or circumstances change between annual tests that would more likely than not reduce the fair value of the respective reporting unit or indefinite-lived intangible below its carrying amount. We perform our annual indefinite-lived intangibles impairment tests on the same dates that we perform our annual goodwill impairment tests for the respective reporting units. In performing our impairment tests, we first consider the option to assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit or intangible, as applicable, is less than its carrying amount. If we conclude that it is more likely than not that the fair value is less than the carrying amount based on our qualitative assessment, or that a qualitative assessment should not be performed, we proceed with the following quantitative impairment tests:

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Goodwill - We compare the estimated fair value of the reporting unit to the carrying value of its net assets. If the fair value of the reporting unit exceeds the carrying value of the net assets of the reporting unit, goodwill is not impaired. If the carrying value of the net assets of the reporting unit exceeds the fair value of the reporting unit, we perform a hypothetical purchase price allocation to determine the implied fair value of the goodwill and compare it to the carrying value of the goodwill. An impairment loss is recognized to the extent the implied fair value of the goodwill is less than the carrying amount of the goodwill.


•	Indefinite-lived intangibles - We compare the estimated fair value of the intangible with its carrying value. If the carrying value of the intangible exceeds its fair value, an impairment loss is recognized in the amount of that excess.

The process of evaluating goodwill and indefinite-lived intangibles for impairment is subjective and requires significant judgment at many points during the analysis. If we elect to perform an optional qualitative analysis, we consider many factors including, but not limited to, general economic conditions, industry and market conditions, our market capitalization, financial performance and key business drivers, long-term operating plans, and potential changes to significant assumptions used in the most recent fair value analysis for either the reporting unit or respective intangible.

When performing a quantitative goodwill or indefinite-lived intangibles impairment test, we determine fair value using an income-based approach, a market-based approach or a combination of both methods. The fair value determination consists primarily of using unobservable inputs under the fair value measurement standards.

If the critical assumptions used in our impairment testing deteriorate or are otherwise adversely impacted, a lower fair value estimate may result. In particular, the goodwill acquired in our recent acquisitions of Open Colleges and Milpark Education was principally attributable to future earnings potential associated with student growth. If these acquired entities do not achieve our forecasts, the goodwill could be impaired in the future.

Refer to Note 8, Goodwill and Intangibles.

Other Long-Lived Asset Impairments

We evaluate the carrying amount of our other long-lived assets, including property and equipment and finite-lived intangibles, whenever changes in circumstances or events indicate that the value of such assets may not be recoverable. During fiscal year 2013, we recorded $20.4 million of long-lived asset impairments, which includes $12.2 million resulting from our restructuring activities. Refer to Note 2, Restructuring and Other Charges, and Note 7, Property and Equipment, Net.

As of August 31, 2014, we believe the carrying amounts of our remaining other long-lived assets are recoverable and no impairment exists. However, we are continuing to adapt our business to the rapidly developing changes in our industry, and changes to our business or other circumstances could lead to potential impairments in the future.

Leases

We enter into various lease agreements in conducting our business. We evaluate the lease agreement at the inception of the lease to determine whether the lease is an operating or capital lease. Additionally, our lease agreements may contain renewal options, tenant improvement allowances, rent holidays, and/or rent escalation clauses. When such items are included in a lease agreement, we record a deferred rent asset or liability on our Consolidated Balance Sheets and record the rent expense evenly over the term of the lease. Leasehold improvements are reflected under investing activities as purchases of property and equipment on our Consolidated Statements of Cash Flows. Credits received against rent for tenant improvement allowances are reflected as a component of non-cash investing activities on our Consolidated Statements of Cash Flows. For leases with renewal options, we generally record rent expense on a straight-line basis over the initial non-cancelable lease term (in instances where renewal is not reasonably assured). Refer to Note 16, Commitments and Contingencies.

We are also required to make additional payments under lease terms for taxes, insurance, and other operating expenses incurred during the lease period, which are expensed as incurred. Rental deposits are provided for lease agreements that specify payments in advance or deposits held in security that are refundable, less any damages at lease end.

Restructuring and Other Charges

Restructuring and other charges principally consist of non-cancelable lease obligations, severance and other employee separation costs, and other related costs. We recognize restructuring obligations and liabilities for other exit and disposal activities at fair value in the period the liability is incurred. The process of measuring fair value and recognizing the associated liabilities is subjective and requires significant judgment. For our non-cancelable lease obligations, we record the obligation when we terminate the contract in accordance with the contract terms or when we cease using the right conveyed by the contract. Our employee severance costs are expensed on the date we notify the employee, unless the employee must provide future service, in which case the benefits are expensed over the future service period.

We generally estimate the fair value of restructuring obligations using significant unobservable inputs (Level 3) based on the best available information. For non-cancelable lease obligations, the fair value estimate is based on the contractual lease costs over the remaining terms of the leases, partially offset by estimated future sublease rental income. Our estimate of the amount and timing of sublease rental income considers subleases we expect to execute, current commercial real estate market data and conditions, comparable transaction data and qualitative factors specific to the facilities. The estimates are subject to adjustment as market conditions change or as new information becomes available, including the execution of sublease agreements.

Changes to restructuring obligations in periods subsequent to the initial fair value measurement are not measured at fair value. We record a cumulative adjustment resulting from changes in the estimated timing or amount of cash flows associated with restructuring obligations in the period of change using the same discount rate that was initially used to measure the obligation’s fair value. Changes in restructuring obligations resulting from the passage of time are recorded as accretion expense. The adjustments to restructuring obligations, including accretion expense, are included in restructuring and other charges on our Consolidated Statements of Income. Refer to Note 2, Restructuring and Other Charges.

Loss Contingencies

We are subject to various claims and contingencies including those related to regulation, litigation, business transactions, employee-related matters and taxes, among others. When we become aware of a claim or potential claim, the likelihood of any loss or exposure is assessed. If it is probable that a loss will result and the amount of the loss or range of loss can be reasonably estimated, we record a liability for the loss. The liability recorded includes probable and estimable legal costs incurred to date and future legal costs to the point in the legal matter where we believe a conclusion to the matter will be reached. The liability excludes any anticipated loss recoveries from third parties such as insurers, which we record as a receivable if we determine recovery is probable. If the loss is not probable or the amount of the loss or range of loss cannot be reasonably estimated, we disclose the claim if the likelihood of a potential loss is reasonably possible and the amount of the potential loss could be material. For matters where no loss contingency is recorded, we expense legal fees as incurred. The assessment of the likelihood of a potential loss and the estimation of the amount of a loss or range of loss are subjective and require judgment. Refer to Note 16, Commitments and Contingencies.

Share-Based Compensation

Our outstanding share-based awards principally consist of restricted stock units, performance share awards and stock options, and restricted stock units represent the majority of our share-based compensation expense in recent years. We measure and recognize compensation expense for all share-based awards based on their estimated fair values on the grant date. We record compensation expense, net of forfeitures, for all share-based awards over the requisite service period using the straight-line method for awards with only a service condition, and the graded vesting attribution method for awards with service and performance conditions.

For share-based awards with performance conditions, we measure the fair value of such awards as of the grant date and record expense for our estimate of the number of shares expected to vest. Our estimate of the number of shares that will vest is based on our determination of the probable outcome of the performance condition, which may require considerable judgment. We record a cumulative adjustment to share-based compensation expense in periods that we change our estimate of the number of shares expected to vest. Additionally, we ultimately adjust the expense recognized to reflect the actual vested shares following the resolution of the performance conditions.

We estimate expected forfeitures of share-based awards at the grant date and recognize expense only for those awards expected to vest. We estimate our forfeiture rate based on several factors including historical forfeiture activity, expected future employee turnover, and other qualitative factors. We ultimately adjust this forfeiture assumption to actual forfeitures. Therefore, changes in the forfeiture assumptions do not impact the total amount of expense ultimately recognized over the requisite service period. Rather, different forfeiture assumptions only impact the timing of expense recognition over the requisite service period.

We typically use the Black-Scholes-Merton option pricing model to estimate the fair value of stock options. The Black-Scholes-Merton option pricing model requires us to estimate key assumptions based on both historical information and management judgment regarding market factors and trends. The following represents our key weighted average assumptions for stock options granted in the respective fiscal years:



	Year Ended August 31,
	2014			2013			2012
Weighted average fair value	$	10.24		$	5.84		$	14.10
Expected volatility	44.3		%	44.4		%	46.6		%
Expected term	4.5			3.4			4.3
Risk-free interest rate	1.4		%	0.7		%	0.6		%
Dividend yield	0.0		%	0.0		%	0.0		%

We estimate expected volatility based on a weighted average of our historical volatility and the implied volatility of long-lived call options. We estimate the expected term of our stock options based primarily on the vesting period of the awards and historical exercise behavior. For the risk-free interest rate, we use the U.S. constant maturity treasury rates interpolated between the years commensurate with the expected life assumptions. Our dividend yield assumption considers that we have not historically paid dividends and we have no current plan to pay dividends in the near-term.

Income Taxes

We are subject to the income tax laws of the U.S. and the foreign jurisdictions in which we have significant business operations. These tax laws are complex and subject to different interpretations by the taxpayer and the relevant governmental taxing authorities. As a result, significant judgments and interpretations are required in determining our provision for income taxes and evaluating our uncertain tax positions.

The objectives of accounting for income taxes are to recognize the amount of taxes payable or refundable for the current year and deferred tax liabilities and assets for the future tax consequences of events that have been recognized in an entity’s financial statements or tax returns. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in earnings in the period when the new rate is enacted. We record a valuation allowance to reduce deferred tax assets to the amount that we believe is more likely than not to be realized.

We have not provided deferred taxes on unremitted earnings attributable to international subsidiaries that have been considered permanently reinvested. As of August 31, 2014, the earnings from these operations are not significant, but they are expected to increase in the future due to our focus on international expansion, which includes two acquisitions by Apollo Global during fiscal year 2014.

We evaluate and account for uncertain tax positions using a two-step approach. Recognition (step one) occurs when we conclude that a tax position, based solely on its technical merits, is more likely than not to be sustained upon examination. Measurement (step two) determines the amount of benefit that is greater than 50% likely to be realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information. Derecognition of a tax position that was previously recognized would occur when we subsequently determine that a tax position no longer meets the more likely than not threshold of being sustained. We classify interest and penalties accrued in connection with unrecognized tax benefits as income tax expense on our Consolidated Statements of Income. Our total unrecognized tax benefits, excluding interest and penalties, were $18.4 million and $44.1 million as of August 31, 2014 and 2013, respectively. Refer to Note 12, Income Taxes.

Marketing Costs

We expense marketing costs, the substantial majority of which represents advertising, as incurred.

Earnings per Share

Our outstanding shares consist of Apollo Class A and Class B common stock issued, net of shares held in treasury. Our Articles of Incorporation treat the declaration of dividends on the Class A and Class B common stock in an identical manner. As such, both the Class A and Class B common stock are included in the calculation of our earnings per share. Basic income per share is calculated using the weighted average number of Class A and Class B common shares outstanding during the period.

Diluted income per share is calculated similarly except that it includes the dilutive effect of share-based awards under our stock compensation plans by applying the treasury stock method. Our share-based awards with performance conditions are contingently issuable and are included in the calculation of diluted income per share based on our evaluation of the performance criteria as of the end of the respective period. The amount of any tax benefit to be credited to additional paid-in capital related to our share-based awards, and unrecognized share-based compensation expense is included when applying the treasury stock method in the computation of diluted income per share. Refer to Note 14, Earnings Per Share.

Foreign Currency Translation

We use the U.S. dollar as our reporting currency. The functional currency of our entities operating outside the U.S. is the currency of the primary economic environment in which the entity primarily generates and expends cash, which is generally the local currency. The assets and liabilities of these operations are translated to U.S. dollars using exchange rates in effect at the balance sheet dates. Income and expense items are translated monthly at the average exchange rate for that period. The resulting translation adjustments and the effect of exchange rate changes on intercompany transactions of a long-term investment nature are included in shareholders’ equity as a component of accumulated other comprehensive loss, noncontrolling interests or redeemable noncontrolling interests, as applicable. We report gains and losses from foreign exchange rate changes related to intercompany receivables and payables that are not of a long-term investment nature, as well as gains and losses from foreign currency transactions in other (loss) income, net on our Consolidated Statements of Income. These items represented a net $1.0 million loss, net $0.2 million loss and net $0.5 million gain in fiscal years 2014, 2013 and 2012, respectively.

Fair Value

The carrying amount of financial assets and liabilities reported on our Consolidated Balance Sheets, including accounts receivable and accounts payable, approximate fair value because of the short-term nature of these financial instruments.

For fair value measurements of assets and liabilities that are recognized or disclosed at fair value, we consider fair value to be an exit price, which represents the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that is determined based on assumptions that market participants would use in pricing an asset or liability. We use valuation techniques to determine fair value consistent with either the market approach, income approach and/or cost approach, and we prioritize the inputs used in our valuation techniques using the following three-tier fair value hierarchy:


•	Level 1 - Observable inputs that reflect quoted prices (unadjusted) in active markets for identical assets and liabilities;


•	Level 2 - Observable inputs other than quoted prices in active markets for identical assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and


•	Level 3 - Unobservable inputs that are supported by little or no market activity.

We categorize each of our fair value measurements for disclosure purposes in one of the above three levels based on the lowest level input that is significant to the fair value measurement in its entirety. In measuring fair value, our valuation techniques maximize the use of observable inputs and minimize the use of unobservable inputs. We use prices and inputs that are current as of the measurement date, including during periods of market volatility. Therefore, classification of inputs within the hierarchy may change from period to period depending upon the observability of those prices and inputs. Our assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the fair value of certain assets and liabilities and their placement within the fair value hierarchy. Refer to Note 9, Fair Value Measurements.

Discontinued Operations

If we determine we will not have significant continuing involvement with components that are classified as held for sale or otherwise sold or disposed, the results of operations of these components are presented separately on our Consolidated Statements of Income as (loss) income from discontinued operations, net of tax, in the current and prior periods. The operating results of our discontinued operations only include revenues and costs directly attributable to discontinued operations. Refer to Note 3, Discontinued Operations.

Reclassifications

We reclassified the following during fiscal year 2014 for prior periods to conform to our current presentation:


•	We began presenting share reissuances in the aggregate on our Consolidated Statements of Shareholders’ Equity and Redeemable Noncontrolling Interests, which consists of reissuances attributable to our employee stock purchase plan and our equity compensation plans that were previously reported separately;


•	We began presenting litigation charge (credit) as a component of the change in accrued and other liabilities on our Consolidated Statements of Cash Flows, which did not impact total cash provided by operating activities; and


•	As discussed in Note 3, Discontinued Operations, we began presenting Institute for Professional Development’s operating results as discontinued operations on our Consolidated Statements of Income.

Recent Accounting Pronouncements

In August 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-15, “Presentation of Financial Statements - Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern” (“ASU 2014-15”). The standard requires management to evaluate, at each interim and annual reporting period, whether there are conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date the financial statements are issued, and provide related disclosures. ASU 2014-15 is effective for annual periods ending after December 15, 2016, and for annual and interim periods thereafter, and early adoption is permitted. We do not expect to early adopt ASU 2014-15, which will be effective for us for our fiscal year ending August 31, 2017, and we do not believe the standard will have a material impact on our financial statements.

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”). The standard is a comprehensive new revenue recognition model that requires revenue to be recognized in a manner to depict the transfer of goods or services to a customer at an amount that reflects the consideration expected to be received in exchange for those goods or services. ASU 2014-09 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016, and early adoption is not permitted. Accordingly, the standard is effective for us on September 1, 2017 using either a full retrospective or a modified retrospective approach. We are currently evaluating which transition approach to use and the impact that the standard will have on our financial statements.

In April 2014, the FASB issued ASU No. 2014-08, “Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity” (“ASU 2014-08”). The standard raises the threshold for a disposal to qualify as a discontinued operation and requires new disclosures of both discontinued operations and certain other disposals that do not meet the definition of a discontinued operation. ASU 2014-08 is effective for fiscal years, and interim periods within those years, beginning on or after December 15, 2014, and early adoption is permitted. We do not expect to early adopt ASU 2014-08, which will be effective for us on September 1, 2015 and will apply to disposals that have not yet been reported in our financial statements as of the adoption date. Accordingly, the standard will not impact our previously reported disposals, and we will evaluate the impact of the standard on any disposals that occur after adoption.