2 Overview of Chapter 12 Who has standard setting authority? What types of entities are included?General reporting principles and Illustrative transactionsExample Financial Statements
3 Ownership Types Investor Owned: Humana Corporation Investor Owned:Humana CorporationStock is widely held and the company is listed on the New York Stock ExchangePrivate Not-For-Profit:St. Joseph’s Hospital of AtlantaThe Hospital is owned by the (Catholic) Archdiocese of AtlantaGovernment Owned:Medical College of Georgia HospitalThe Hospital and other facilities are owned by the State of Georgia
4 Standard Setting Authority GASB - Category A GAAPAuthority over government related hospitalsFASB -Private not-for-profit hospitalsMajor FASBs 93, 116,117, 124, 136Investor owned hospitalsOther FASBsAdditional guidance is provided by the AICPA Audit Guide for Health Care Organizations.- This is level B GAAP for government related, private not-for-profits, and business oriented
5 What Types of Organizations? ClinicsMedical groupsIndividual practitionersEmergency careLaboratoriesSurgery care centersContinuing careHMOsHome health agenciesHospitalsNursing homesRehabilitation centers
6 Hospital Financial Statements Balance Sheet,Most use classified balance sheet – exception: continuing care communitiesStatement of Operations,Statement of Changes in EquityStatement of Cash Flows and Notes
7 Display Issues – Statement of Operations Private not-for-profits and Government related entities must provide a Performance Indicator.This a measure of income which excludes:Equity transfers,Restricted Contributions,Contributions of LT assets,Most unrealized gains and losses,Restricted investment returns, andExtraordinary items
8 Display Issues – Statement of Operations, cont’d Patient service revenues are shown net of contractual adjustments.Patient service revenue excludes charity care (service provided where there is no expectation of payment).The estimate of uncollectible accounts is shown as an operating expense.
9 Display Issues – Statement of Operations, cont’d Operating revenues are often classified asNet patient service revenues, premium (capitation) revenue, and Other Revenue (parking lot, gift shop, cafeteria, and tuition).Unrestricted gifts may be treated as Operating or Nonoperating depending on policy.Expenses: Minimum must report 2 functions: health care and general/admin.
10 Display Issues – Balance Sheet FASB vs. GASB equity accounts:FASB: unrestricted, temporarily restricted, and permanently restricted net assetsThe term restricted used only for donor restrictions;Assets whose use is limited is used to indicate board or bond covenant restrictions.GASB: unrestricted net assets, restricted net assets, and capital assets net of related debt
11 Comparison of Financial Statements Two statements take the place of the Statement of Activities:Statement of Operations:Similar for not-for-profits, Government, BusinessStatement of Changes in Net Assets:not-for-profits must show details of net changes for unrestricted, temporarily and permanently restricted
12 Comparison of Financial Statements Statement of Financial Position:Classified, similar for not-for-profit, Government, and commercial businesses except for the equity sectionnot-for-profit: unrestricted, temporarily and permanently restrictedGovernment: unrestricted, restricted, invested in capital assets net of debtBusiness: Contributed Capital and Retained EarningsStatement of Cash Flows:Business and not-for-profits use the FASB format (3 sections); Governments use the GASB format (4 sections)