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Unformatted text preview: CHAPTER 19 UNDERSTANDING THE ISSUES 1. The measurement focus used by public uni- versities under GASB Statement No. 34 is both the flows of financial resources and the flows of eco- nomic resources. Private universities use a meas- urement focus of economic resources. Both entities use full accounting and must focus on the recovery of costs. However, a public university also must ad- here to the governmental reporting model and yearly funding and budgetary issues of governments. Therefore, they have unique needs for a financial re- sources (working capital) focus. 2. Accounting for contributions for a private uni- versity requires recognizing revenue in the period the unconditional contribution (or promise to give) is received. If a donor-imposed restriction as to use or time period is present, the contribution is recognized as temporarily restricted revenue in the period re- ceived. When donor-imposed restrictions are satis- fied, the restriction is released. In a public university, contributions of cash or investments to the unrestric- ted current fund may be recorded as revenue in the period received unless the contribution is designated for future periods. Contributions designated for fu- ture 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 organiza- tion. 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 provi- sions of the grant. This distinction is important in private universities since under FASB 116 only a contribution can be restricted. It is less important in public universities where both contributions and grants are considered restricted revenues. 4. Most governmental colleges or universities will be required to report both funds-based information in their financial statements as well as entity-wide con- solidated information. Therefore, fund information will continue to be important. Government and other grantors may also want to see resources accounted for separately from unrestricted resources. 5. Private colleges or universities may also report both funds-based information in their financial state- ments to provide more information to governments, donors, and grantors who are interested in the prop- er recording of restricted resources. 6. Assets limited as to use are not restricted, merely board (or internally) designated. Only a donor can impose a restriction per FASB Statement No. 116. 7. 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 ad- herence to gross revenue determination is designed to get the maximum revenue to cover costs. Adjust- ments are then determined in the contractual negoti- ations with HMOs and other insurance providers....
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This note was uploaded on 04/07/2008 for the course ACCT. 3533 taught by Professor Jahanian during the Spring '08 term at Temple.
- Spring '08