Transcript Document

west virginia chapter
Accounting and
Auditing Update
Winter Education Conference
January 15, 2015
1
Norman C. Mosrie, CPA, CHFP, FHFMA
Norman serves as Partner-in-Charge of Assurance for the Western Mid-Atlantic region focusing in the areas
of healthcare, not-for-profit and insurance. A certified healthcare financial professional, Norman was
previously a partner with a Big Four firm, where he worked for 24 years.
With his involvement with the American Institute of Certified Public Accountants Healthcare Expert Panel
and FASB not-for-profit advisory committee, Norman is actively involved in accounting, financial reporting,
and other matters impacting the healthcare and not-for-profit industries.
CONTACT INFORMATION
500 Virginia Street, East
Suite 800
Charleston, WV 25301
304.414.3913 direct
[email protected]
His significant healthcare experience includes financial reporting, acquisition due diligence, corporate
compliance, process analysis, A-133 auditing and reporting requirements, and third-party reimbursement for
various types of healthcare entities including academic medical centers, community hospitals, nursing
homes, home health agencies, physician practices, and research organizations. He also has experience
performing audits in accordance with Government Auditing Standards and OMB Circular A-133 including
Medicaid.
Norman has developed and led healthcare training programs at the local, area, and national levels.
PROFESSIONAL AND CIVIC ORGANIZATIONS
• American Institute of Certified Public Accountants (AICPA), Former Council Member and Healthcare
Expert Panel Member, National Healthcare Conference Chairman, Alternative Investments Taskforce
• West Virginia Society of Certified Public Accountants (WVSCPA), Past President and Board of Directors
• Charleston Chapter of WVSCPAs, Past President
• Financial Accounting Standards Board (FASB), Not-for-Profit Advisory Committee
• Government Finance Officers Association, Special Review Committee Member
• Marshall University College of Business Advisory Board, President
• Healthcare Financial Management Association, Past Board Member
• Marshall University Alumni Association, Past Board Member
• Rotary Club, Past President and Paul Harris Fellow
EDUCATION
• Marshall University, Bachelor of Business Administration, Accounting, summa cum laude
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Topics
1. ASU 214-09: Revenue Recognition
Background and Overview
2. FASB Project: NFP Financial
Reporting Model
3. Business Associates
4. Rp-2014: New Morality Tables
Released
5. Common Practice Issues: RAC Audits
6. Accounting for ICD-10 Costs
7. ASU 2012-01: Continuing Care
Retirement Communities –
Refundable Advance Fees
8. ASU 2012-05: Classification of the
Statement of the Sole Proceeds of
Donated Financial Assets in the
Statement of Cash Flows
9. ASU 2013-04: Obligations Resulting
from Join and Several Liability
Arrangements
10. ASU 2013-06: Services Received
from Personnel of an Affiliate
11. ASU 2014-17: Business
Combinations – Pushdown
Accounting
12. ASU 2014-15: Disclosure of
Uncertainties about an Entity’s Ability
to Continue as a Going Concern
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Discuss recent accounting standards as well
as emerging practice issues related to
healthcare entities
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4
Coincidence…or NOT???
IF…
ABCDEFGHIJKLMNOPQRSTUVWXYZ
EQUALS…
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26
Then…
K+N+O+W+L+E+D+G+E
11+14+15+23+12+5+4+7+5 = 96%
H+A+R+D+W+O+R+K
8+1+18+4+23+15+18+11 = 98%
Both are important, but fall just short of 100%
5
Coincidence…or NOT???
BUT…
1 +20+20+ 9 +20+21+ 4 + 5 = 100%
__+__+__+__+__+__+__+__
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Coincidence…or NOT???
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ASU 2014-09
Revenue
Recognition
Background and
Overview
8
ASU 2014-09: Revenue Recognition
Objective: single, principle-based revenue
standard
• Improve accounting for contracts with
customers
• More robust framework for recognizing revenue
• Increased comparability across industries and
capital markets
• Better disclosures
Substantially converged with IFRS on major provisions
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ASU 2014-09: Summary
• FASB created a new Topic 606 that will replace Topic 605
when this standard is adopted
– ASU 2014-09 will supersede most industry-specific guidance
• Core principle is to recognize revenue to depict the transfer of
promised goods or services to customers in an amount that
reflects the consideration to which the entity expects to be
entitled in exchange for those goods or services
• Guidance specifies the accounting for an individual contract
with a customer; however, as a practical expedient, an entity
may apply guidance to a portfolio of contracts (or
performance obligations) with similar characteristics if the
entity reasonably expects that the effects on the financial
statements would not differ materially from applying guidance
to individual contracts
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Scope
• All contracts with customers, except
–
–
–
–
–
Lease contracts
Insurance contracts
Financial instruments
Guarantees
Non-monetary exchanges between entities in the
same line of business to facilitate sales to customers
• Also excluded: contributions, collaborative
arrangements
• Sales/Transfers of nonfinancial assets outside of
the entity’s ordinary activities (Subtopic 610-20)
– Recognition and measurement guidance
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Five steps to apply standard
Recognize revenue to depict the transfer of goods or services in
an amount that reflects the consideration to which the entity
expects to be entitled
1
Identify the contract(s) with a customer
2
Identify the performance obligations in the
contract
3
Determine the transaction price
4
Allocate the transaction price to the
performance obligations in the contract
5
Recognize revenue when (or as) the entity
satisfies a performance obligation
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Effective Date
Public business entities and certain
not-for-profit entities including
conduit bond obligors
• Fiscal years, and interim periods within those years, beginning
after December 15, 2016 (no early adoption)
All other entities
• Fiscal years beginning after December 15, 2017, interim periods in
fiscal years beginning after December 15, 2018 (can adopt at
same time as public business entities)
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Transition Approaches
The following chart summarizes the transition options available to
entities (based on a calendar fiscal year for NFP conduit bond obligor)
Transition Approach
Full Retrospective
Retrospective Using One or
More Practical
Expedients
Cumulative Effect at the
Date of Adoption
2016
2017
Date of
Cumulative Effect
Adjustment
Restate for all contracts
Apply to all
contracts
January 1, 2016
Restate for all contracts
except for contracts or
estimates covered by the
practical expedients
elected by the entity
Apply to all
contracts
January 1, 2016
No contracts restated;
reported on the basis of
legacy guidance
Apply to all
contracts
January 1, 2017
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ASU 2014-09: Implementation
Significant effort likely to be expended as the U.S. moves
from the current industry-specific guidance to this new,
broader, principles-based approach
• FASB: Joint Transition Resource Group
– To identify and discuss broader issues, including those that may
warrant follow-up standard-setting activity by the FASB
– Similar to what we’ve done in the past following issuance of FAS
157 (Valuation Resource Group) and certain other broad
standards
• AICPA: Various Industry-focused Groups
– Includes one for Healthcare and one for NFPs
– Work to culminate in the issuance of a Revenue Recognition
Guide
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AICPA Revenue Recognition Task Forces
• Develop a new Accounting Guide on Revenue
Recognition
• Guide to provide helpful hints and Illustrative examples
on how to apply the standard
• Guidance will not be prescriptive but instead intended to
be a resource
• Full implementation issues will be posted for comment
after review from the overall Revenue Recognition
Working Group and FinREC
• List of issues by industry is posted on the AICPA website
– www.aicpa.org
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ASU 2014-09
• 606-10-32-2-An entity shall consider the terms
of the contract and its customary business
practices in determining the transaction price
• 606-10-32-7 Indicates that the entity should
consider its intention to offer price concessions
to the customer, which would be applicable to
uninsured patients in a provider setting
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Revenue Recognition Project: Provider Specific
Considerations
• Revenue transactions involving multiple
contractual relationships
– Many different parties may be associated with a
revenue transaction involving a hospital
– The “customer” is the patient
• Third-party payor makes payment on the patient’s
behalf; it is not a separate “contract with a customer”
• Many implementation issues will likely arise.
Two issues identified as having potential
significant impact on providers are:
– Accounting for uninsured patients
– Estimating variable consideration from
governmental payors
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Revenue Recognition Project: Provider Specific
Considerations
Issue #1: How are services performed from
uninsured patients accounted for? See
sections 606-10-55-102 through 105
– Provider evaluates the patient’s intent and ability
to pay
– Estimate of variable consideration based on
collection history of patients in the customer class
(i.e. discounts and price concessions)
– The amount estimated to be uncollectible from
uninsured patients is considered a price
concession
• Gross charges of $10,000 but only expect to receive
$1,000 recognize $1,000 of revenue assuming other
criteria under 606-10-25-1 are met
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Financial Reporting - Presentation of Bad Debts
Under current practice, ASU 2011-07 requires
some healthcare providers to present bad debt as
a deduction from patient service revenue
Under the new standard, bad debts will be
presented as an operating expense
20
Revenue Recognition Project: Provider Specific
Considerations
Issue #2: How should providers estimate
variable consideration from arrangements
from governmental payors?
• Determination of the transaction price for
third-party settlements
– Medicare/Medicaid cost report settlements
– RAC accruals
– Risk adjustments for Prepaid Health plans
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Revenue Recognition Project: Provider Specific
Considerations
Issue #2 (cont’d):
• How does the use of expected
amount/most likely amount (606-10-32-8)
differ from today’s “best estimate”?
– Use method which entity expects to better
predict the amount of consideration to which it
will be entitled
• Use of Expected Value (probability-weighted
amount)
• Use of Most Likely Amount (single most likely
amount in a range of possible considerations)
22
Other Healthcare Issues identified
• Identifying the performance obligation and
recognition of refundable and nonrefundable entrance fees for CCRC’s
• Prepaid Health Services
• Accountable Care Organizations
• Contract acquisition costs
23
FASB Projects
Not-for-profit
Financial
Reporting Model
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NFP financial reporting project
• Goals
– Better align activity in operating and cash flow
statements
– Better align reporting between NFP HCOs
Statement
of Operations
Statement of Cash Flows
and other
NFPs
categories
Business and charitable
activities
categories
Operating activities
Investing activities
Nonoperating activities
Financing activities
25
Financial Performance: Operating Measure
Defined a
required
intermediate
operating
measure for all
NFPs—based on
two dimensions:
Mission (Business & Charitable
Activity):
based on whether resources are from or directed
at carrying out an NFP’s purpose for existence
(vs. investing and financing)
Availability:
based on whether resources are available for current
period activities and reflecting limits of both:
-external donor-imposed limitations and
-internal actions of an NFP’s governing board
Presentation of Transfers, to depict internal actions:
•
•
Separate section within operating measure, after revenue and expense subtotal
Includes gifts of/ for capital items when placed in service
26
Operating Measure
NFP business-oriented
health care entities no
longer required to present
the performance indicator
Remove req. that if an
operating measure is
presented, then the
change in unrestricted net
assets must be shown
(ASC 958-225-45-10)
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Net Assets
Current
GAAP
Proposed
GAAP
Unrestricted
Temp.
Restricted
Perm.
Restricted
Without Donor
Restrictions
With Donor Restrictions
Amount and
purpose of board
designations
Nature and amount
of donor restrictions
+
Disclosures
“Underwater” Endowments
• Revised net asset classification: Reflected in net assets with donor
restrictions rather than in net assets without donor restrictions
• Enhanced disclosure in addition to current GAAP
28
Proposed new performance statement
The basic framework
Without Donor
Restrictions
With Donor
Restrictions
Business and charitable activities (operating)
Operating revenues
XXX
Operating expenses
XXX
Revenues in excess of expenses
XXX
Transfers in/(out)
XXX
New performance (operating)
measure
XXX
XXX
Nonoperating activities (financing/investing/other)
Interest expense
XXX
Investment return
XXX
OCI items
XXX
Transfers in/out
Change in net assets
XXX
(XXX)
XXX
XXX
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Interest expense
Today’s model
Proposed new model
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Reporting of Investment Expenses
How to present?
• Net presentation of investment expenses against
investment return on the face of the statement of
activities
• Netting limited to external and direct internal expenses
What to disclose?
• Disclosure of investment expenses no longer required,
except for the disclosure of the amount of internal
salaries and benefits that have been netted (if any)
against investment return
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Investment return
Today’s model
Proposed new model
32
Contributions
Today’s model
Proposed new model
33
Contributions for PP&E
Without Donor
Restrictions
With Donor
Restrictions
Business and charitable activities
(operating)
Cash gifts restricted for PP&E
Release of restriction
Gift of building to be used in operations
Revenues in excess of expenses
$
--100
$
100
(100)
90
XXX
Transfers:
Gifts of/for long-lived assets
New performance (operating)
measure
(190)
XXX
If instead, NPO
planned to sell
the building
(e.g. to obtain
cash for
investment),
no transfer to
nonoperating
would be made
Nonoperating (financing/investing/other)
Transfers:
Gifts of/for long-lived assets
Change in net assets
190
XXX
XXX
34
Other Transfers
Business and charitable activities (operating)
Unrestricted contributions
xxx
Release of restriction
xxx
Revenues in excess of expenses
xxx
Operating:
contributions that
are available for
current spending
Transfers in (out):
Board-designated for quasi-endowment
(XX)
Spending rate on endowment
XXX
New performance (operating) measure
XXX
Nonoperating (financing/investing/other)
Transfers in (out):
Board-designated for quasi-endowment
Spending rate on endowment
Change in net assets
Transfers:
used to reflect
impact of
governing board
designations
XX
(XXX)
XXX
35
Financial Performance: Cash Flow Statement
• Require Direct Method for operating cash
flows
- Indirect method no longer permitted
• Re-categorize certain items to better align
“operating” with activities statement and
operating measure
– Purchases and proceeds on sales of PP&E
– Cash restricted for PP&E
– Cash from interest and dividends
– Interest paid on long-term debt
36
Cash Flow Statement
Cash Flows from Operating Activities
Cash received from service recipients
Cash received from donors
Cash paid to employees
Cash paid to vendors
Purchase of property and equipment
Proceeds on sale of property and equipment
Contributions restricted for property and equipment
Net cash from operating activities
Cash Flows from Investing Activities
Cash received from interest and dividends
Purchase of investment assets
Proceeds from sale of investments
Net cash from investing activities
Cash Flows from Financing Activities
Payments of principal on long-term debt
Interest paid on long-term debt
Contributions restricted for endowment
Net cash from financing activities
Net increase in cash
Cash at the beginning of year
Cash at end of year
37
Reporting of Expenses
FUNCTION
Program Activities
Program A
Program B
*
Supporting Activities
M&G
Fundraising
Not functionalized
Total
Operating
Expenses
NonOperating
Total
Expenses
Salaries & Benefits
Grants to Others
Equipment Rental &
Maintenance
Occupancy Cost
Depreciation
Information Technology
Professional Service Fees
Supplies
Travel
Printing & Publication
Interest
Other
*N
A
T
U
R
E
Total
•
•
Qualitative disclosure on cost allocation among program and support functions required
Also, will provide better guidance on ‘Management and general’ activities
*Either (or both) on face of Statement of Activities
38
Liquidity
The Board decided that an entity should
define the time horizon it uses to manage
its liquidity (for example, 30, 60, or 90
days) and disclose the following
information:
Asset type /
debt
maturity
Donor /
other
external
restrictions
and internal
limits
1. Quantitative information about:
a) The total amount of financial assets
b) Amounts that are not available to meet cash needs within the time
horizon because of (1) external limits and (2) internal actions of a
governing board
c) The total amount of financial liabilities that are due within that time
horizon.
2.
Qualitative information about how the entity manages its liquidity.
For example, an entity might disclose:
a) Its strategy for addressing entity-wide risks that may affect liquidity,
including its use of lines of credit
b) Its policy for establishing liquidity reserves
c) Its basis for determining the time horizon used for managing liquidity
39
NFP Financial Statements: Next Steps
• Exposure Draft (ED)—proposed
ASU exposed for comments
(estimated: Q1 2015)
– Board to have final cost-benefit
discussion prior to issuance
• Comment period (Q1-Q2 2015):
more outreach, field visits/
workshops, roundtables, etc.
• Begin redeliberations in Q3 2015
40
HIPAA / HITECH
Business
Associates
41
Background-HIPAA
• Health Insurance Portability & Accountability
Act of 1996 (HIPPA)
– Governs the access, use, and disclosure of
protected health information by covered entities
• Covered entity:
– health plan,
– health care clearinghouse,
– or a health care provider who transmits any
health information in electronic form in connection
with a transaction covered by HIPAA
42
Background-HIPAA
• Protected Health Information (“PHI”):
Individually identifiable health information
that is transmitted or maintained in any
form or medium.
– Individually Identifiable Health Information:
Information, including demographic
information, created or received by a health
care provider, health plan, employer, or health
care clearinghouse that can be used to
identify an individual and that relates to the
person’s health care.
43
Background-HITECH
• Health Information Technology for Economic
and Clinical Health Act (HITECH),
– Enacted as part of the American Recovery and
Reinvestment Act of 2009 (“Stimulus Bill”), P.L.
111-5
• Amends HIPAA to impose significant new
duties on covered entities and business
associates to notify patients, the Federal
Government, and the media of breaches of
unsecured PHI
• Requires breach investigation and notification
• Increased penalties and sanctions
44
Business Associate
• Business Associate: third-party (not an
employee of the covered entity) that
performs or assists in performing a
function or activity involving the use or
disclosure of PHI
– Vendors
– Service providers (billing, tech support)
– Accounting firms, law firms
45
Business Associate Agreements
• Health plans and providers are required to enter into
business associate agreements (“BAAs”) with business
associates
• BAAs impose on the business associate similar
obligations to those on the health plan or provider
• Either party to a BAA must take action if aware that the
other party has violated confidentiality
• Business associates now have affirmative duty to notify
covered entities of breaches of unsecured PHI and to
take steps to prevent and mitigate breaches.
• Business associates can be directly liable for breaches
and are subject to the same penalties as covered
entities.
46
Rp-2014
New Mortality
Tables Released
47
New RP-2014 Mortality Tables Released
• The Society of Actuaries released new RP2014 mortality tables in October 2014.
• These new mortality tables should be used in
estimating pension and other obligations with
measurement dates of October 2014 and
forward.
• Tables reflect an increase in life expectancy
so obligations are expected to increase.
• Management should discuss the new
mortality tables with plan actuaries that they
plan to rely on as specialists.
48
Common Practice Issues
RAC Audits
49
49
Common Practice Issues: RAC Audits
• Question: Is it appropriate for an HCO to record a
revenue reserve at the date the services are rendered
for Medicare revenue that it believes CMS will “take
back” as a result of future adjustments and/or
findings?
• HCOs should make a reasonable estimate of the
amounts it expects to receive from third-party payers
and such estimates shall be recorded in the period
that the related services are rendered
– ASC 954-605-25-6 states “Estimates of contractual
adjustments, other adjustments, and the allowance for
uncollectibles shall be reported in the period during
which the services are provided even though the
actual amounts may become known at a later date.
50
Common Practice Issues: RAC Audits
• There is significant diversity in practice on how
healthcare entities are estimating and recording
recoveries for claims under appeal.
• When an entity receives notification from CMS
of the payment reduction it indicates that the
revenue criteria may not been met…so the
company must evaluate whether this is
– a change in estimate, or
– a correction of a prior period error.
51
Common Practice Issues: RAC Audits
• If this is considered to be a change in
estimate then
– an accrual for RAC adjustment should be
recorded
– this is generally a contra revenue adjustment
along with the set up of a corresponding liability
• There is a diversity of practice on when to
record a receivable for recoveries on
appealed claims.
• There are two alternate views on this topic…
52
Common Practice Issues: RAC Audits
• View 1:
– This view is based on ASC 450-30,
Contingencies.
– Since it is not certain that the provider’s
appeal will be successful, no receivable or
related gain should be recorded until the
appeals process is complete.
53
Common Practice Issues: RAC Audits
• View 2:
– This view is based on SOP 00-1,“Auditing Health
Care Third-Party Revenues and Related
Receivables,” which states that “The fact that
information related to the effects of future
program audits, administrative reviews,
regulatory investigations, or other actions does
not exist does not lead to a conclusion that the
evidence supporting management's assertions is
not sufficient to support management's
estimates”.
– Under this view, estimating recoveries for the
successful appeal of denied RAC claims would
be appropriate.
54
Common Practice Issues: RAC Audits
– However, this estimate should be based on
provider specific facts and circumstances and the
success rate of the organization during prior
appeals process related to similar claims.
– While industry data can (i.e. AHA, RACTRAC) be
used to corroborate company estimates, many
believe that can’t be the sole support for
recording claims recoveries.
– Some firm’s have taken the position that View 1 is
the only acceptable response in absence of
provider specific data as described above so
need to discuss with your auditor early in the
estimation process.
55
Program Integrity Audits (Cont’d)
• Recovery Audit Contractors (RACs)
• Recent CMS 68% Settlement Offer
– All outstanding appeals of denied short-term IP stays
– Hospitals had 14 days to submit final list of claims and
signed Administrative Agreement after accepting
– Deadline to accept was 10/31/14
56
56
Common Practice Issues: RAC Audits
For more information on this
topic, please refer to the HFMA
white paper at:
http://www.hfma.org/RACAccounting/
57
ICD-10
Accounting for
ICD-10 Costs
58
Accounting for Costs Incurred During
Implementation of ICD-10
• Effective Date
– ICD-10 implementation deadline of 10/1/14
10/1/15
• Impact
– Costs incurred are either capitalized or expensed:
• Business process re-engineering - Expense as incurred
• Education and training of coders, clinicians, and
business office personnel - Expense as incurred
• Project consultants - Capitalize/expense as appropriate
– Allocate contract price to project components based on
relative fair values, then treat accordingly
• Modification and replacement of billing and medical
records information systems - Capitalize/expense as
appropriate
59
Accounting for Costs Incurred During
Implementation of ICD-10
• Impact
– Modification and replacement of billing and
medical records information systems:
• Property and equipment – Capitalize based on
capitalization policy
– Allocate maintenance/service costs and report separate
from fixed assets
• Software development and modification
– Only upgrades and enhancements that result in additional
functionality can be capitalized
» Preliminary project stage – Expense as incurred
» Application development stage - Capitalize/expense
using internal-use software guidance
» Post implementation-operation stage – Expense as
incurred
60
ASC 720-45-55 Illustration
Internal-Use Software Implementation Costs
Legend:
a - Expense as incurred per ASC 720-45
b - Expense as incurred per ASC 350-40
c - Capitalize per ASC 350-40
61
ASU 2012-01
Continuing Care
Retirement
Communities –
Refundable
Advance Fees
62
ASU 2012-01: Health Care Entities, Continuing Care
Retirement Communities – Refundable Advance Fees
• Continuing care retirement communities should
classify advance fees as deferred revenue only when
– A resident contract provides that a portion of the advance
fee is refundable upon re-occupancy by a subsequent
resident
– The refund is limited to the proceeds from the new
occupant, and
– Legal and management policy and practice support the
withholding of refunds under this condition.
• Otherwise amounts would be classified as a
refundable fee liability.
• Reported as cumulative effect adjustment to beginning
net assets or retained earnings of the earliest year
presented.
63
ASU 2012-01: Health Care Entities, Continuing Care
Retirement Communities – Refundable Advance Fees
• Effective Date
– For public entities, effective fiscal periods
beginning after December 15, 2012
• If your organization has publicly traded debt or conduit
debt, you would be considered a public entity for
reporting purposes.
• For example, tax exempt bonds issued through an
issuing authority would be conduit debt.
– For non-public entities, fiscal periods beginning
after December 15, 2013.
– Retrospective application to all prior periods
presented upon the date of adoption is permitted.
64
64
ASU 2012-05
Classification of
the Statement of
the Sale Proceeds
of Donated
Financial Assets
in the Statement
of Cash Flows
65
ASU 2012-05: Not-for-Profit Entities: Classification of the Sale Proceeds of
Donated Financial Assets in the Statement of Cash Flows
• Affects entities within the scope of ASC 958 that
accept donated financial entities
• Not-for-profit entities receive donations in many
forms, including various types of financial assets
(e.g., equity and debt securities, partnership
interests). Many NFPs have policies requiring
that donated financial assets be sold shortly
after being received from the donor
66
ASU 2012-05: Not-for-Profit Entities: Classification of the
Sale Proceeds of Donated Financial Assets in the Statement
of Cash Flows
• A not-for-profit entity should classify the sale of
donated securities that are directed to be sold
upon receipt in the near-immediate future and
that can be sold in the near-immediate future as
operating activities in the statement of cash
flows
• However, if the donor restricted the use of the
contributed resources to long-term purpose,
then those cash receipts should be classified as
cash flows from financing activities
67
67
ASU 2012-05: Not-for-Profit Entities: Classification of the
Sale Proceeds of Donated Financial Assets in the Statement
of Cash Flows
• Effective Date
– Effective prospectively for fiscal years, and
interim periods within those years, beginning
after June 15, 2013
– Retrospective application to all prior periods
presented upon the date of adoption is
permitted
68
68
ASU 2013-04
Obligations
Resulting from
Joint and Several
Liability
Arrangements
69
ASU 2013-04: Liabilities, Obligations Resulting from
Joint and Several Liability Arrangements
• Affects entities that are jointly and severally liable
with other entities
• The ASU requires entities to “measure obligations
resulting from joint and several liability
arrangements for which the total amount of the
obligation within the scope of this guidance is fixed
at the reporting date, as the sum of the following:
– The amount the reporting entity agreed to pay on the
basis of its arrangement among its co-obligors
– Any additional amount the reporting entity expects to
pay on behalf of its co-obligors
• Additional required disclosures
70
70
ASU 2013-04: Liabilities, Obligations Resulting from
Joint and Several Liability Arrangements
• Effective Date
– For public entities, effective for fiscal years beginning
after December 31, 2013 (and interim reporting
periods within those years)
– For nonpublic entities, effective for the first annual
period ending on or after December 15, 2014 and
interim and annual reporting periods thereafter
– The ASU should be applied retrospectively to
obligations with joint-and-several liabilities existing at
the beginning of an entity’s fiscal year of adoption.
– Entities that elect to use hindsight in measuring their
obligations during the comparative periods must
disclose that fact
– Early adoption is permitted
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71
ASU 2013-06
Services Received
from Personnel of
an Affiliate
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ASU 2013-06: Not-for-Profit Entities, Services
Received from Personnel of an Affiliate
• Affects not-for-profit entities, including not-for profit, businessoriented health care entities, that receive services from personnel of
an affiliate that directly benefit the recipient not-for-profit entity and
for which the affiliate does not charge the recipient not-for-profit
entity.
• ASU requires a recipient not-for-profit entity to recognize all services
received from personnel of an affiliate that directly benefit the
recipient not-for-profit entity.
• Services should be measured at the cost recognized by the affiliate
for the personnel providing those services. In certain instances it
may not be appropriate to measure at cost, and the recipient not-forprofit entity may elect to recognize the service received at either (1)
the cost recognized by the affiliate for the personnel providing that
service or (2) the fair value of that service.
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73
ASU 2013-06: Not-for-Profit Entities, Services
Received from Personnel of an Affiliate
• Effective date
– Effective prospectively for fiscal years beginning after
June 15, 2014, and interim and annual periods
thereafter
– A recipient not-for-profit entity may apply the
amendments by using a modified retrospective
approach under which all prior periods presented on
the adoption date should be adjusted but no
adjustment should be made to the beginning balance
of net assets for the earliest period presented
– Early adoption is permitted
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74
ASU 2014-17
Business
Combinations Pushdown
Accounting
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ASU 2014-17: Business Combinations – Pushdown
Accounting
• Previously no guidance for non SEC registrants and
current U.S. GAAP offered limited guidance when and
how pushdown accounting should be applied
• New ASU provides option to apply pushdown accounting
when acquirer (defined in Topic 805) obtains control of
reporting entity
Effective on November 18, 2014
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ASU 2014-17: Business Combinations – Pushdown
Accounting
• Scope – Applies to the separate financial statements of
an acquired entity and its subsidiaries that are a
business or non-profit activity (either public or nonpublic) in which an acquirer obtains control of the
acquired entity
• Main Provisions --– Acquired entity may elect the option to apply pushdown
accounting in the reporting period when the change-in-control
event occurred
– Acquired entity may elect the option to apply pushdown
accounting in a subsequent reporting period (this will be treated
as a change in accounting principle in accordance with Topic
250)
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ASU 2014-17: Business Combinations – Pushdown
Accounting
An acquirer can obtain control in a variety of ways:
a) transferring cash or other assets
b) incurring liabilities
c) issuing equity interests
d) providing more than one type of consideration
e) W/O transferring consideration, including by
contract alone
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ASU 2014-17: Business Combinations – Pushdown
Accounting
• If an acquiree elects the option to apply
pushdown accounting
– Reflect in its separate FS the new basis of
accounting established by the acquirer for the
individual assets and liabilities
– Shall recognize goodwill that arises because of
pushdown accounting
– Bargain purchase gains recognized by the
acquirer shall not be recognized in the income
statement of the acquiree
• The bargain purchase gain shall be recognized as an
adjustment to APIC or net assets for a non-profit
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ASU 2014-17: Business Combinations – Pushdown
Accounting
Disclosures:
• The name and a description of the acquirer
• How they obtained control
• Acquisition date
• Acquisition-date FV of the total consideration
• Amounts recognized by the acquiree for each
major class of assets and liabilities
• Qualitative description of the factors that make up
goodwill recognized and intangible assets that do
not qualify for separate recognition
• Info to evaluate the financial effects of the
adjustments
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Q&A
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