In July 2012, the American Institute of Certified Public Accountants (“AICPA”) issued a Technical Practice Aid (“TPA”) on accounting for costs incurred during the implementation of International Classification of Diseases, 10th Edition (“ICD-10”). Implementation of ICD-10 was initially scheduled for October 1, 2013; however, in April 2012, the U.S. Department of Health and Human Services proposed to delay the implementation until October 1, 2014. The final deadline is pending, but implementation of ICD-10 will be mandatory for all healthcare providers in the United States.
The TPA instructs entities to follow the guidance set forth in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 720-45, which specifies that project costs should be segregated between process reengineering activities, software development and modification activities, and costs associated with the acquisition of fixed assets. The guidance specifies that costs associated with processing engineering are to be expensed as incurred, while costs associated with developing or modifying software are either capitalized or expensed based on FASB’s internal-use software guidance. That guidance specifies that modifications which add “additional functionality” to software should be capitalized, while changes that are more routine and maintenance-orientated in nature should be expensed as incurred. Costs associated with acquiring new fixed assets for ICD-10 implementation should be capitalized in accordance with an organization’s fixed asset capitalization policy. Consulting expenses related to ICD-10 implementation should be allocated among the three different components, based on the relative fair value of each component. Expenses related to the training of coding professionals and providers regarding the use and transition to the ICD-10 coding system should be expensed as incurred.
The professionals of PYA are ready to discuss both the implementation and accounting for ICD-10. For more information, please contact the experts listed below at (800) 270-9629.
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