Pershing Yoakley & Associates, P.C., is pleased to present the August 2011 Audit & Accounting Update. This publication is designed to provide direct access to current audit and accounting information that is relevant to you.
FASB Activities
Recently Completed Projects
The Financial Accounting Standards Board (FASB) has released two Accounting Standards Updates (ASU) and one Proposed Accounting Standards Update (PASU). A summary of these items is provided below.
ASU No. 2011-07, Health Care Entities (Topic 954): Presentation and Disclosure of Patient Service Revenue, Provision for Bad Debts, and the Allowance for Doubtful Accounts for Certain Health Care Entities
This ASU affects entities that recognize significant amounts of patient service revenue at the time services are rendered, regardless of a patient s ability to pay. This ASU also requires certain healthcare entities to change the presentation of their statement of operations to reclassify the provision for bad debts associated with patient revenue from an operating expense to a deduction from patient service revenue. The entity would then show a resulting amount of net patient service revenue less the provision for bad debts. Bad debts related to receivables from revenue other than patient services can continue to be presented as an operating expense.
The ASU also requires these healthcare entities to provide additional disclosure about their revenue recognition and bad debt policies. The entity shall disclose, by major payor source, its policy for assessing collectability in determining the timing and amount of net patient service revenue to be recognized, as well as its net patient service revenue before the provision for bad debts for each major payor. The entity is also required to include a qualitative and quantitative analysis of the changes in the allowance for doubtful accounts related to patient receivables.
For public entities, the ASU will be effective for fiscal years and interim periods beginning after December 15, 2011, with early adoption permitted. For nonpublic entities, the ASU will be effective for the first annual period ending after December 15, 2012, and interim and annual periods thereafter, with early adoption permitted. The amendments to the presentation for the provision for bad debts related to patient service revenue should be applied retrospectively to all prior periods presented.
To view these ASUs in their entirety, please click here.
ASU No. 2011-06, Other Expenses (Topic 720): Fees Paid to Federal Government by Health Insurers (a consensus of the FASB Emerging Issues Task Force)
This ASU was drafted in an effort to address how health insurers should recognize and classify in their income statements fees mandated by the Patient Protection and Affordable Care Act as amended by the Health Care and Education Reconciliation Act (collectively, the Acts). The Acts require an annual fee be paid by health insurers for each calendar year beginning on or after January 1, 2014. This fee is required to be paid by health insurers by September 30th of the applicable calendar year and the fee is not tax deductible. The amendments in this ASU indicate that the liability related to the payment of the annual fee should be estimated and recorded in full once the entity provides qualifying health insurance in the applicable calendar year in which the fee is payable with a corresponding deferred cost that is to be amortized to expense using a straight-line method of allocation unless another method better allocates the fee over the calendar year that it is payable. The amendments in this ASU are effective for fiscal years beginning after December 31, 2013.
PASU No. EITF-100E, Property, Plant, and Equipment (Topic 360): Derecognition of in Substance Real Estate–a Scope Clarification (a consensus of the FASB Emerging Issues Task Force)
This PASU would require the guidance established in FASB Accounting Standards Codification (ASC) 360-20, Property, Plant, and Equipment Real Estate Sales, be applied when a reporting entity ceases to have a controlling financial interest in a subsidiary that is in substance real estate as a result of default on the subsidiary s nonrecourse debt when determining whether it should derecognize the assets and liabilities of the subsidiary. The FASB is currently accepting comments on this PASU and the deadline for comments is October 3, 2011. If passed, the amendments would be applied on a prospective basis to deconsolidation events occurring after the effective date. Prior periods would not be adjusted even if the reporting entity has continuing involvement with previously derecognized in substance real estate entities. The effective date will be determined after the Task Force considers feedback on the PASU. To view this PASU in its entirety, please click here.
GASB Activities
Exposure Drafts
The Governmental Accounting Standards Board (GASB) released two Exposure Drafts (ED). A summary of these items is provided below.
ED No. 34-E, Accounting and Financial Reporting for Pensions an amendment of GASB Statement No. 27
The primary objective of this proposed statement is to improve accounting and financial reporting of governmental entities whose employees are provided with pensions and to improve the information about the financial support that is provided on their behalf by other entities. The proposed statement would require the recognition of the entire net pension liability and would require a more comprehensive measure of pension expense. The proposed statement would also require new note disclosures and required supplementary information. A single employer that participates in a single-employer defined benefit pension plan that has a plan net position of $1 billion or more in the first fiscal year ending after June 15, 2010, would be required to implement the requirements of the proposed statement in periods beginning after June 15, 2012, if the employer meets specific criteria. For all other employers, and for governmental nonemployer contributing entities, this proposed statement would be effective for periods beginning after June 15, 2013. Early application would be encouraged. The deadline for comment is September 30, 2011.
ED No. 34-P, Financial Reporting for Pension Plans an amendment of GASB Statement No. 25
The primary objective of this proposed statement is to improve financial reporting by governmental entity pension plans. The proposed statement would require defined benefit pension plans administered through qualified trusts to present two financial statements, a statement of plan net position and a statement of changes in plan net position. The proposed statement would require single-employer and cost-sharing pension plans administered through qualified trusts to present supplementary information in schedules covering the past 10 fiscal years that document the changes in net pension liability of the employer(s) and information about the components of the net pension liability of the employer(s). A single-employer pension plan that has a plan net position of $1 billion or more in the first fiscal year ending after June 15, 2010, would be required to implement the requirements of the proposed statement in periods beginning after June 15, 2012, if the employer meets specific criteria. For all other pension plans, this proposed statement would be effective for financial statements for periods beginning after June 15, 2013. Early application would be encouraged. The deadline for comment is September 30, 2011.
To view these EDs in their entirety, please click here.
For more information, please contact the experts listed below at PYA, (800) 270-9629.
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