Essentials of Accounting for
Governmental and Not-for-Profit
Organizations
Chapter 12:
Accounting for Hospitals and Other
Care Providers
McGraw-Hill/Irwin
©2007, The McGraw-Hill Companies, All Rights Reserved
12-2
Overview of Chapter 12
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Who has standard setting authority?
What types of entities are included?
General reporting principles
Illustrative transactions
Example Financial Statements
12-3
Ownership Types
Investor Owned:
Humana Corporation
Private Not-For-Profit:
St. Joseph’s Hospital of
Atlanta
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Stock is listed on the New York
Stock Exchange
The Hospital is owned by the
(Catholic) Archdiocese of Atlanta
The Hospital and other facilities
Government Owned:
are owned by the State of
Medical College of Georgia Georgia
Hospital
12-4
Standard setting authority
• GASB - Category A GAAP
– Authority over government related hospitals
• FASB - Categornot-for-profit GAAP
– Private nonprofit hospitals
• Major FASBs 93, 116,117, 124, 136
– Investor owned hospitals
• Other FASBs
• AICPA Audit Guide for Health Care
Organizations.- Level B GAAP for government
related, private not-for-profits, and business oriented
12-5
What types of Organizations?
• Clinics
• Medical groups
• Individual
practitioners
• Emergency care
• Laboratories
• Surgery care centers
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Continuing care
HMOs
Home health agencies
Hospitals
Nursing homes
Rehabilitation centers
12-6
Hospital Financial Statements
– Balance Sheet,
• Most use classified balance sheet –
exception: continuing care communities
– Statement of Operations,
– Statement of Changes in Equity,
– Statement of Cash Flows and Notes
12-7
Display Issues –
Statement of Operations
• Private not-for-profits and
Government related entities must
provide a Performance Indicator
which excludes:
Equity transfers, Restricted Contributions,
Contributions of LT assets, Most unrealized
gains and losses, Restricted investment
returns, Extraordinary items
12-8
Display Issues –
Statement of Operations cont’d
• Patient service revenues shown net of
contractual adjustments; separate out
capitation agreement revenues
• Patient service revenue excludes charity
care
12-9
Display Issues –
Statement of Operations cont’d
• Operating revenues often classified as
– Net patient service revenues, premium (capitation)
revenue, and Other Revenue (parking lot, gift shop,
cafeteria, and tuition).
• Unrestricted gifts may be treated as Operating or
Nonoperating depending on policy.
• Expenses: Minimum must report 2 functions:
health care and general/admin.
12-10
Display Issues – Balance Sheet
• The term restricted used only for donor
restrictions; Assets whose use is limited is
used to indicate board or bond covenant
restrictions.
• FASB vs. GASB equity categories
– FASB: unrestricted, temporarily restricted,
permanently restricted
– GASB: unrestricted, restricted, capital assets net of
related debt
12-11
Comparison of Financial
Statements
• Statement of Operations:
– Similar for not-for-profits, Government,
Business
• Statement of Changes in Net Assets:
– not-for-profits must show details of net changes
for unrestricted, temporarily and permanently
restricted
12-12
Comparison of Financial
Statements
• Statement of Financial Position:
– Classified, similar for not-for-profit, Government,
Business except for equity section
• not-for-profit: unrestricted, temporarily and permanently
restricted
• Government: unrestricted, restricted, invested in capital assets
net of debt
• Business: Contributed Capital and Retained Earnings
• Statement of Cash Flows:
– Bus and not-for-profit, 3 sections; Governmental, 4
sections