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TQA addresses health care accounting for items free of charge received for distribution

By Ken Tysiac

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In some circumstances, for-profit health care business entities may consider analogizing to not-for-profit guidance in U.S. GAAP when accounting for vaccines or other pharmaceuticals, medical supplies, or equipment received free of charge for distribution to specified patients, according to technical question and answer (TQA) guidance developed by the AICPA Health Care Expert Panel and issued Tuesday by the AICPA.

If the transaction is an exchange transaction or part of an exchange transaction, the guidance in FASB Accounting Standards Codification (ASC) 606, Revenue From Contracts With Customers, should be applied, according to TQA Section 6400.71.

If the arrangement is a nonexchange transaction, the guidance in FASB ASC Subtopic 958-605, Not-for-Profit Entities — Revenue Recognition, should be applied by nongovernmental not-for-profit health care entities, the TQA says. The AICPA staff has observed that in addition to not-for-profits, for-profit health care business entities might consider Subtopic 958-605 for application by analogy when the resource provider is a governmental entity.

U.S. GAAP does not contain specific accounting guidance for for-profit health care entities for transfers from governmental entities, but FASB ASC Topic 105, Generally Accepted Accounting Principles, describes how to proceed when guidance for a transaction or event is not specified within U.S. GAAP. The AICPA staff has observed that the Subtopic 958-605 guidance is one method that a for-profit health care entity may apply for nonexchange transactions that fit the TQA’s fact pattern.

The TQA provides additional accounting guidance for nongovernmental not-for-profit and for-profit health care business entities applying Subtopic 958-605 in these circumstances. The TQA does not discuss other methods that might be considered for application by analogy by for-profit health care business entities when the resource provider is a governmental entity.

— To comment on this article or to suggest an idea for another article, contact Ken Tysiac at Kenneth.Tysiac@aicpa-cima.com.