With recently effective accounting standards, impending ICD-10 implementation and requirements under the Affordable Care Act, there’s a lot for healthcare providers and their financial professionals to manage. PYA continues its efforts to support financial professionals in the healthcare industry through these changes, recently presenting at the Georgia Society of CPA’s 2014 Healthcare Conference. PYA Principal Doug Arnold, CPA, provided an “Accounting and Auditing Update Overview.”

1. Accounting and Auditing
Update Overview
Georgia Society of CPAs Healthcare Conference
February 7, 2014
Presented by Doug Arnold, CPA, Principal
Pershing Yoakley & Associates, P.C.
Prepared for Georgia Society of CPAs Healthcare Conference
February 7, 2014
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2. Overview
• Recently Issued/Effective Accounting Standards
Updates (ASU)
• Recently Issued/Effective Governmental Accounting
Standards Board (GASB) Pronouncements
• Other Healthcare Specific Items
Prepared for Georgia Society of CPAs Healthcare Conference
February 7, 2014
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3. Accounting Standards Updates
• Perspective of not-for-profit and governmental
healthcare entities
• Other recent ASUs:
– ASU 2014-04, Receivables - Troubled Debt
Restructurings by Creditors (Subtopic 310-40)
– ASU 2014-01, Investments - Equity Method and Joint
Ventures (Topic 323)
– ASU 2013-05, Foreign Currency Matters (Topic 830)
– ASU 2013-02, Comprehensive Income (Topic 220)
Prepared for Georgia Society of CPAs Healthcare Conference
February 7, 2014
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4. Recently Issued/
Effective Accounting
Standards Updates (ASU)
Prepared for Georgia Society of CPAs Healthcare Conference
February 7, 2014
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5. ASU 2011-11, Balance Sheet (Topic 210):
Disclosures about Offsetting Assets and Liabilities
• Effective: Retrospectively periods beginning on or after
(PBOA) January 1, 2013
• Impact:
– Expanded disclosure about items eligible for offsetting
– Both gross and net information should be disclosed
– Applicable to all financial instruments and derivative
investments
• Other:
– Should be presented in tabular format
Prepared for Georgia Society of CPAs Healthcare Conference
February 7, 2014
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6. ASU 2013-01: Balance Sheet (Topic 210): Clarifying the Scope
of Disclosures about Offsetting Assets and Liabilities
• Effective: PBOA January 1, 2013
• Impact:
– Clarification that ASU 2011-01, Balance Sheet (Topic
210): Clarifying the Scope of Disclosures about Offsetting
Assets and Liabilities, does not apply to financial assets
and liabilities subject to a master netting arrangement
– Clarifies that derivative instruments accounted for under
Topic 815, and reverse repurchase agreements and
securities borrowing/lending transactions are subject to
2011-01
Prepared for Georgia Society of CPAs Healthcare Conference
February 7, 2014
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7. ASU 2012-01, Health Care Entities (Topic 954):
Continuing Care Retirement Communities Refundable Advance Fees
• Effective:
Public:
Periods beginning after (PBA)
December 15, 2012
Non-Public:
PBA December 15, 2013
[Apply Retrospectively]
• Impact:
– Advance fees should be classified as deferred revenue if required to be
refunded upon reoccupancy and which limits a refund to proceeds of
reoccupancy
– Refundable advance fees that are contingent on reoccupancy but not limited
should be displayed as a liability at the estimated refundable amount
– Deferred revenue is amortized into income, consistent with the method for
calculating depreciation
Prepared for Georgia Society of CPAs Healthcare Conference
February 7, 2014
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8. ASU 2012-02, Intangibles - Goodwill and Other (Topic 350):
Testing Indefinite-Lived Intangible Assets for Impairment
• Effective: PBA September 15, 2012
• Impact:
– Similar to goodwill ASU
– Allows an entity to first perform an assessment of
qualitative factors to determine whether it is more
likely than not that an indefinite-lived intangible asset
is impaired
Prepared for Georgia Society of CPAs Healthcare Conference
February 7, 2014
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9. ASU 2012-05: Statement of Cash Flows (Topic 230): Not-for-Profit
Entities: Classification of the Sale Proceeds of Donated Financial
Assets in the Statement of Cash Flows
• Effective: Prospectively PBA June 30, 2013
• Impact: Cash flow statement presentation for cash
flows from the sale of donated assets:
– Operating Activities: Converted nearly immediately
to cash (unless restricted to long-term use: then
financing)
– Investing Activities: Not sold immediately
Prepared for Georgia Society of CPAs Healthcare Conference
February 7, 2014
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10. ASU 2013-03: Financial Instruments (Topic 825):
Clarifying the Scope and Applicability of a
Particular Disclosure to Nonpublic Entities
• Effective: Upon issuance
• Impact:
– For non-public entities with more than $100 million in
assets or which have derivative instruments
– Clarifies the fair value hierarchy disclosure for items
not measured at fair value (only disclosure of fair
value) does not apply
Prepared for Georgia Society of CPAs Healthcare Conference
February 7, 2014
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11. ASU 2013-04: Liabilities (Topic 405): Obligations Resulting from
Joint and Several Liability Arrangements for Which the Total
Amount of the Obligation Is Fixed at the Reporting Date
• Effective:
Public:
December 15, 2013
Non-Public:
December 15, 2014
[Apply Retrospectively]
• Impact: Requires an entity to measure obligations for joint
and several obligations for which the total amount of the
obligation is fixed as of the reporting date as:
– The amount the entity has agree to repay, plus
– Any additional amount the entity expects to pay on behalf of
co-obligors
Prepared for Georgia Society of CPAs Healthcare Conference
February 7, 2014
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12. ASU 2013-04: Liabilities (Topic 405): Obligations Resulting from
Joint and Several Liability Arrangements for Which the Total
Amount of the Obligation Is Fixed at the Reporting Date
• Impact (Continued): Expanded disclosure
• Other
– Fixed amount. However for line of credit changes or changes
due to interest rate – not an exception
– Additional amounts to recognize – “Better estimate than
others” or minimum amount
– Disclosures: Nature of arrangements, total outstanding
amount, nature of recourse provisions (if any), impact in initial
period and in any subsequent periods with substantial changes
Prepared for Georgia Society of CPAs Healthcare Conference
February 7, 2014
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13. ASU 2013-06: Not-for-Profit Entities (Topic 958):
Services Received from Personnel of an Affiliate
• Effective: PBA June 15, 2014. Modified retroactive
adoption
• Impact:
– Expense and “contribution” from commonly controlled
affiliates must be recognized in recipient’s financial
statements
– Usually recognized at cost but entity can elect fair
value if cost is not deemed appropriate
– The amount is shown outside of the Performance
Indicator as an equity transfer
Prepared for Georgia Society of CPAs Healthcare Conference
February 7, 2014
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14. ASU 2013-06: Not-for-Profit Entities (Topic 958): Services
Received from Personnel of an Affiliate
• Other:
– Applies only to personnel costs
– Not applicable if compensation is received
– Applies to services received from not-for-profit or forprofit affiliates
– Cannot be a “contra-expense”
Prepared for Georgia Society of CPAs Healthcare Conference
February 7, 2014
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15. ASU 2013-07: Presentation of Financial Statements
(Topic 205): Liquidation Basis of Accounting
• Effective: PBA December 15, 2013
• Impact: Requires liquidation basis when liquidation is
imminent, defined as when there is a remote likelihood entity
will return from liquidation and either:
– Liquidation plan has been approved and unlikely it will be
blocked or
– A plan of liquidation is being forced by other forces
• Other:
– Recognize assets not previously recognized
– Expanded disclosure
Prepared for Georgia Society of CPAs Healthcare Conference
February 7, 2014
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16. ASU 2013-10: Derivatives and Hedging (Topic 815): Inclusion of
the Fed Funds Effective Swap Rate (or Overnight Index Swap Rate)
as a Benchmark Interest Rate for Hedge Accounting Purposes
• Effective: Prospectively for new or redesignated
hedging relationships on or after July 17, 2013
• Impact: Expands benchmark rates to include
federal funds rates
Prepared for Georgia Society of CPAs Healthcare Conference
February 7, 2014
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17. ASU 2013-11: Income Taxes (Topic 740): Presentation of an
Unrecognized Tax Benefit When a Net Operating Loss Carryforward,
a Similar Tax Loss, or a Tax Credit Carryforward Exists
• Effective: Public:
PBA December 15, 2013
Non-public: PBA December 15, 2014
• Impact:
– Required disclosure of uncertain tax positions when it
is unlikely there will be an actual tax payment due to
net operating loss carryovers
– ASU 2013-11 requires that instead of recording a
liability for uncertain tax positions, deferred tax
assets would be reduced
Prepared for Georgia Society of CPAs Healthcare Conference
February 7, 2014
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18. ASU 2013-12: Definition of a Public Business
Entity – An Addition to the Master Glossary
• Effective: No actual effective date
• Impact:
– Identifies entities within the scope of the Private
Company Decision-Making Framework (the Guide)
– Clarifies those entities which potentially qualify for
alternative financial accounting and reporting
guidance
Prepared for Georgia Society of CPAs Healthcare Conference
February 7, 2014
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19. ASU 2013-12: Definition of a Public Business
Entity – An Addition to the Master Glossary
• Overview:
– Provides a single definition of “Public Business Entity”
(generally one that files financial statements with the SEC)
– Excludes all NFPs from this definition. Change from past
practice of “conduit debt” as indicator
– Board will consider NFPs on a standard-by-standard basis
as to when NFPs may utilize alternative reporting
– Does not affect existing requirements
– As a future project, will determine if it is necessary to
undertake a project for existing GAAP “public company”
requirements
Prepared for Georgia Society of CPAs Healthcare Conference
February 7, 2014
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20. ASU 2014-02: Intangibles – Goodwill
and Other (Topic 350)
• Effective: If elected, apply prospectively to existing
goodwill and new goodwill for PBA December 15, 2014.
Early application permitted.
• Impacts: All entities except “Public Business Entities,”
NFPs and benefit plans
• Overview:
– Amortize goodwill, straight-line, over ten years (or less if
appropriate)
– Test goodwill when triggering event occurs
– Qualitative approach, then quantitative
Prepared for Georgia Society of CPAs Healthcare Conference
February 7, 2014
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21. ASU 2014-03: Derivatives and
Hedging (Topic 815)
• Effective: PBA December 15, 2014. Two
approaches to adoption: modified retrospective or
full retrospective
• Impacts: All entities except “Public Business
Entities,” NFPs, benefit plans and financial
institutions
Prepared for Georgia Society of CPAs Healthcare Conference
February 7, 2014
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22. ASU 2014-03: Derivatives and
Hedging (Topic 815)
• Overview:
– Simplified approach. Interest charged on income
statement (in a hedge transaction) is similar to that as if
entity had directly entered into the fixed-rate borrowing
– May assume no ineffectiveness for designated hedges
– Six criteria must be met
– Measure swap at settlement value versus fair value (no
non-performance risk)
Prepared for Georgia Society of CPAs Healthcare Conference
February 7, 2014
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23. Recently Issued/Effective
Governmental Accounting
Standards Board (GASB)
Pronouncements
Prepared for Georgia Society of CPAs Healthcare Conference
February 7, 2014
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24. GASB 65: Items Previously
Reported as Assets and Liabilities
• Effective: PBA December 15, 2012. Restate earlier periods
• Impact: Identify items previously reported as assets/
liabilities as deferred outflows/inflows of resources (GASB
63)
• Other:
– Refunding of debt-report as deferred inflow/outflow
– Debt issuance costs/loan origination costs - expense in period
incurred
– Gain/loss on sale/leaseback – reclassify as deferred inflow/outflow
– Prepaid debt insurance - recognize as asset and amortize
– Limit the use of the word “deferred”
Prepared for Georgia Society of CPAs Healthcare Conference
February 7, 2014
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25. GASB 68: Accounting and Financial Reporting for
Pensions - an amendment of GASB Statement No. 27
• Effective: PBA June 15, 2014. To the extent
practical restate prior periods presented
• Impact:
– Defined benefit plans:
• A liability should be recognized for the total pension
liability less legally restricted plan assets. Previously,
only recognized difference in amounts paid versus
actuarially determined annual contribution
Prepared for Georgia Society of CPAs Healthcare Conference
February 7, 2014
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26. GASB 68: Accounting and Financial Reporting for
Pensions - an amendment of GASB Statement No. 27
• Impact (Continued):
– Defined benefit plans (Continued):
• If pension plan's assets exceed the total pension
liability, then a net pension asset would be recognized
• GASB 68 requires the entry age actuarial cost method
be utilized
• Ad hoc benefit increases should be included if
substantively automatic
Prepared for Georgia Society of CPAs Healthcare Conference
February 7, 2014
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27. GASB 68: Accounting and Financial Reporting for
Pensions - an amendment of GASB Statement No. 27
• Impact (Continued):
– Defined benefit plans (Continued):
• Pension expense will be recognized as change in net
pension liability, introducing more volatility
• Changes in net pension liability not recognized in
expense should be reported as deferred inflows/
outflows
• Changes in amortization period for gains/losses,
including investment gains/losses
Prepared for Georgia Society of CPAs Healthcare Conference
February 7, 2014
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28. GASB 68: Accounting and Financial Reporting for
Pensions - an amendment of GASB Statement No. 27
• Impact (Continued):
– Expanded disclosures
– Defined contribution plans:
• Recognize pension expense for the amount of
contributions or credits to employees' accounts, net of
forfeited amounts that are removed from employees’
accounts
• Recognize pension liability equal to the difference
between amounts recognized as pension expense and
amounts paid by the employer to the pension plan
Prepared for Georgia Society of CPAs Healthcare Conference
February 7, 2014
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29. GASB 70: Accounting and Financial Reporting
for Nonexchange Financial Guarantees
• Effective: PBA June 15, 2013. Restate prior years
• Impact: Recognize a liability when more likely than
not the government will be required to make a
payment on a guarantee
• Other:
– Record best estimate
– No best estimate: NPV of minimum amount in range
Prepared for Georgia Society of CPAs Healthcare Conference
February 7, 2014
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30. Other Healthcare
Specific Items
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February 7, 2014
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31. Other Healthcare Specific Items
• ICD-10 implementation (TPA 6400.48)
• Presentation of Claims Liabilities and Insurance
Recoveries (TPA 6400.49)
• Accrual of Legal Costs Associated with Contingencies
Other than Malpractice (TPA 6400.50)
• Insurer Payment of Claims Directly (TPA 6400.51)
• Insurance Recoveries from Certain Retrospectively
Rated Insurance Policies (TPA 6500.52)
Prepared for Georgia Society of CPAs Healthcare Conference
February 7, 2014
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32. Questions?
Contact information for Doug Arnold
(800) 270-9629
darnold@pyapc.com
Prepared for Georgia Society of CPAs Healthcare Conference
February 7, 2014
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