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).  

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

While the effective dates for the new guidance are staggered, they are now upon us. With limited exceptions, the new guidance was effective as of January 1, 2018 for public entities with calendar year ends. For all nonpublic entities with calendar year ends, the new guidance is effective in the year ending December 31, 2019. Time is of the essence for these entities given that implementation of the new guidance could represent a significant undertaking in many cases. Our white paper can be a valuable tool in the implementation process to help understand the application of ASC 606 to health care entities.

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