22_Fischer10e_SM_Ch19_final - CHAPTER 19 UNDERSTANDING THE...

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CHAPTER 19 UNDERSTANDING THE ISSUES 1. The measurement focuses used by public uni- versities under GASB Statement No. 34 are both the flows of financial resources and the flows of economic resources. Private universit- ies use a measurement focus of economic resources. Both entities use full accrual accounting and must focus on the recovery of costs. However, a public university also must adhere to the governmental reporting model and yearly funding and budgetary issues of governments. Therefore, they have unique needs for a financial resources (working capit- al) focus. 2. Accounting for contributions for a private uni- versity requires recognizing revenue in the period the unconditional contribution (or prom- ise to give) is received. If a donor-imposed restriction as to use or time period is present, the contribution is recognized as temporarily re- stricted revenue in the period received. When donor-imposed restrictions are satisfied, the restriction is released. In a public university, contributions of cash or investments to the unrestricted current fund may be recorded as revenue in the period received unless the contribution is designated for future periods. Contributions designated for future periods are recognized as deferred revenue. 3. In order for the government grant to be a contri- bution, the grantor may not receive anything of value from the use of the funds by the receiving organization. If something of value is given in return for the grant, the grant is an exchange transaction that will recognize an equal amount of earned revenue when expenses are made in accordance with the provisions of the grant. This distinction is important in private universit- ies since under FASB Statement No. 116 only a contribution can be restricted. It is less im- portant in public universities where both contri- butions and grants are considered restricted revenues. 4. Assets limited as to use are not restricted, merely board (or internally) designated. Only a donor can impose a restriction per FASB State- ment No. 116. 5. A hospital will bill out to all types of patients (with and without insurance and with different types of insurance coverage) the same amount. This adherence to gross revenue determination is designed to get the maximum revenue to cover costs. Adjustments are then determined in the contractual negotiations with HMOs and other insurance providers. Medicare and Medi- caid reimbursements are considerably lower than most hospital gross revenues due to for- mulas that average cost reimbursement across all of the rural and urban hospitals in the United States. 6. Accounting for medical malpractice claims is of special concern to health care organizations because of the potential for very large ex- penses and the inability to fully insure against the risk of loss. Accounting for medical mal- practice claims is similar to accounting for con- tingencies. “… costs should be accrued when the incidents occur that give rise to the claims if
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This note was uploaded on 02/05/2010 for the course ACC 476 taught by Professor Hildy during the Spring '07 term at Lane.

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22_Fischer10e_SM_Ch19_final - CHAPTER 19 UNDERSTANDING THE...

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