New analyses guide health care entities through change

An expert panel addressed 3 issues for health care entities.

Three nonauthoritative issue analyses prepared by the AICPA Health Care Expert Panel are designed to help health care entities prepare for implementation of FASB's new accounting standard for not-for-profit entity financial statements.

In August 2016, FASB issued Accounting Standards Update No. 2016-14, Not-for-Profit Entities (Topic 958): Presentation of Financial Statements of Not-for-Profit Entities. The standard will change the way not-for-profits classify net assets and prepare financial statements. The new rules take effect for annual financial statements issued for fiscal years beginning after Dec. 15, 2017, and for interim periods within fiscal years beginning after Dec. 15, 2018.

The Health Care Expert Panel addressed three issues for health care entities related to the standard:

  • Natural and functional class presentation. Under the standard, all not-for-profits are required to report expenses by nature and function in one location, which may be on the face of the statement of activities/operations, as a separate statement, or in a footnote disclosure.
  • Liquidity and availability. The standard requires enhanced disclosures to report how the not-for-profit manages its liquidity to meet short-term demands, and the effects of any limits on resources that have been imposed.
  • Net asset presentation. The standard reduces the number of net asset classes from three (unrestricted, temporarily restricted, and permanently restricted) to two — net assets without donor restrictions and net assets with donor restrictions.

Additional information and resources are available at the AICPA's website, aicpa.org.

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