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Changes coming for health care revenue recognition


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The Financial Accounting Standards Board (FASB) and International Accounting Standards Board (IASB) issued substantially converged final standards on revenue recognition in May 2014. The FASB’s Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers (Topic 606), provides a robust framework for addressing revenue recognition issues. All health care organizations' revenue recognition policies will be affected by the new guidance. The degree to which the recognition (e.g., timing) and measurement (e.g., amount) of a particular organization's revenue will be affected depends on its own facts and circumstances. However, one thing is certain—the new guidance will require health care organizations to evaluate whether any changes are needed to their current revenue and financial reporting processes and systems in order to comply. This will undoubtedly require substantive involvement by more than just those involved in the organization’s accounting function.

Even though delayed effective dates are provided in the ASU, it is not too early to start having conversations about that evaluation process, particularly if you plan on electing the retrospective transition method and (or) you have multiyear contracts.  To learn more, read our summary, Changes coming for health care revenue recognition, located at Revenue recognition: Industry insights.

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