In one embodiment, a method for decoding a video bitstream comprises the steps of: (a) receiving a video bitstream; (b) deriving processed video data from the bitstream; (c) partitioning the processed video data into blocks, wherein each of the blocks is equal to or smaller than a picture; (d) deriving an SAO type from the video bitstream for each of the blocks, wherein the SAO type is associated with a specific nonbiased coding scheme; (e) determining an SAO sub-class associated with the SAO type for each of the pixels in each of the blocks; (f) deriving intensity offset from the video bitstream for the sub-class associated with the SAO type; and (g) applying SAO compensation to each of the pixels in a processed video block, wherein the SAO compensation is based on the intensity offset of step (f).