Notes to Consolidated Financial Statements (Dollars in thousands, except per share amounts.)

(3) Change in Accounting Principles The Company changed the following accounting principles effective November 1, 1996: (a) The Company now defers a portion of the earnings realized by irrevocable prearranged funeral trust funds and escrow accounts in order to offset the estimated effects of inflation on the future cost of performing prearranged funeral services. Earnings realized in excess of those deferred are recognized on a current basis, except in those jurisdictions where earnings revert to a customer if a prearranged funeral service contract is canceled. Previously, all such earnings were recognized as realized. (b) The Company now records all revenues and costs attributable to prearranged sales of cemetery interment rights and related products when customer contracts are signed. Allowances for customer cancellations and refunds are provided at the date of sale based upon historical experience. Previously, such sales generally were deferred under the accounting principles prescribed for sales of real estate. Under the Company's application of this method of accounting for sales of real estate, revenues and costs were deferred until 20% of the contract amount had been collected. (c) The Company now records revenue and related costs attributable to cemetery burial site openings and closings at the time of sale. Previously, such sales were deferred until delivery. The accounting changes were made principally for the following reasons: (a) A portion of funeral trust earnings and increasing benefits under insurance contracts is intended to cover increases in the future costs of providing price guaranteed funeral services. The Company believes that deferring such earnings to the extent of the increased costs of the services to be provided will better match revenues and costs because the total funds available to satisfy the contract (principal and deferred earnings) will be included in revenues with concurrent recognition of all costs related to performance of the service when the funeral service is performed. (b) The cemetery accounting methods have been adopted because all significant obligations of the Company, including delivery of products and opening and closing the burial site, have been satisfied in the period the contract is signed. Related costs are provided based on actual costs incurred, firm commitments or reliable estimates. Historical experience is the basis for making appropriate allowances for customer cancellations and will be adjusted when required. The cumulative effect of these changes on prior years resulted in a decrease in net earnings for the year ended October 31, 1997 of $2,324 (net of a $2,230 income tax benefit), or $.03 per share.