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FASB Amends Accounting Standard for Healthcare Entities (Topic 954)

The Emerging Issues Task Force (EITF) reached a consensus and the FASB approved Accounting Standards Update 2011-07 “Health Care Entities: Presentation and Disclosure of Patient Service Revenue, Provision for Bad Debts, and  the Allowance for Doubtful Accounts for Certain Health Care Entities” at their June 2011 meeting. It was decided that healthcare entities that have a significant amount of net patient service revenues (a hospital, for example) should show bad-debt expense related to patient services as a reduction of revenue on the face of the statement of operations. Any bad debts related to non-patient-related services should remain as an operating expense. The task force also decided not to implement the tabular roll-forward of the allowance for uncollectible accounts information in the footnotes as originally proposed. Instead, certain quantitative and qualitative disclosures should be included in the footnotes, including (1) how the organization classifies bad debts for its operations and (2) significant changes in estimates related to the bad-debt expense if that is included as a component of net patient service revenues.

This new standard goes into effect for healthcare entities that are issuers (and healthcare entities that have conduit debt) for fiscal years and interim periods within those years beginning after December 15, 2011, and for healthcare entities that are not issuers for fiscal periods ending after December 15, 2012.  

For more information go to FASB.org, or contact Paul D. Smith, Jr. at psmith@BlackmanKallick.com or 312-980-2901 or your Blackman Kallick representative.

This publication is part of Blackman Kallick’s marketing of professional services, and is not written tax advice directed at the specific facts and circumstances of any person and/or entity. Contents of this publication are of a general nature, and you should not act on this information without obtaining professional advice from your business advisor that is appropriately tailored to your individual needs and circumstances. This written advice is not intended or written to be used, and cannot be used by any taxpayer, for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.