United States

Changes to revenue recognition in the health care industry


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In May 2014, the Financial Accounting Standards Board (FASB) issued new revenue recognition guidance that will, upon its effective date, replace most pre-existing revenue recognition guidance, including industry-specific guidance, in current U.S. generally accepted accounting principles (GAAP). For public entities with a calendar year end (with a limited exception for certain public business entities), implementation of the new guidance must occur no later than the quarter and year beginning January 1, 2018,. Public entities include public business entities and certain not-for-profit entities and employee benefit plans. For all other entities with a calendar year end, implementation must occur no later than the year ending December 31, 2019.

All health care entities whose financial statements are prepared in accordance with U.S. GAAP will be affected by the new guidance. Such entities should not delay their implementation activities given that the effects of the new guidance could be significant from a recognition and measurement perspective and will be significant from a disclosure perspective. To assist in understanding how a health care entity could be significantly affected by the new guidance, we have prepared our white paper, Changes to revenue recognition in the health care industry, in which we discuss the following topics:

  • Recognizing revenue for health care services provided to insured and uninsured patients
  • Accounting for third-party settlement adjustments
  • Recognizing revenue and certain costs related to continuing care retirement communities
  • Accounting for risk sharing arrangements
  • Applying the new guidance using a portfolio approach
  • Addressing the new presentation and disclosure requirements

With over three years having passed since initial issuance of the new guidance, health care entities should be well on their way to assessing how it will affect their revenue recognition accounting policies and disclosures and developing an implementation plan. This is particularly true for those entities that are considered public entities, those that plan on electing the full retrospective transition method and those that have multi-year contract terms with their customers.  


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