Title Details

Founded in 1887, the American Institute of Certified Public Accountants (AICPA) represents the CPA and accounting profession nationally and globally regarding rule-making and standard-setting, and serves as an advocate before legislative bodies, public interest groups and other professional organizations. The AICPA develops standards for audits of private companies and other services by CPAs; provides educational guidance materials to its members; develops and grades the Uniform CPA Examination; and monitors and enforces compliance with the accounting profession's technical and ethical standards.
The AICPA's founding established accountancy as a profession distinguished by rigorous educational requirements, high professional standards, a strict code of professional ethics, a licensing status and a commitment to serving the public interest.

Table of Contents xix

Chapter Paragraph

1 Overview and Unique Considerations of Health Care Entities .01-.14

Purpose .01

Applicability .02-.06

Classification of Health Care Entities .07-.08

Regulatory Environment .09-.14

Health Care Reform  .12-.14

2 General Auditing Considerations .01-.116

Overview .01-.02

An Audit of Financial Statements .03-.09

Audit Risk .05-.09

Terms of Engagement .10-.14

Business Associate Agreements .14

Audit Planning  .15-.18

Group Audits   .19-.24

Multi-Location Audits Versus Group Audits    .23

Complex Transactions .24

Materiality .25-.30

Performance Materiality  .29-.30

Qualitative Aspects of Materiality  .31-.32

Use of Assertions in Assessment of Risks of Material Misstatement .33-.34

Risk Assessment Procedures .35-.57

Risk Assessment Procedures and Related Activities  .37-.43

The Entity and Its Environment  .44-.57

Additional Audit Considerations .58-.96

Analytical Procedures .58-.59

Accounting Estimates .60-.62

Transactions Processed by Service Organizations   .63-.66

Compliance With Laws and Regulations .67-.77

Going-Concern Considerations .78-.89

Written Representations   .90-.96

Independent Auditor’s Reports    .97-.99

Single Audit Act and Related Audit Considerations .100-.106

Statutory Reporting Considerations for Health Plans .107-.116

Risk-Based Capital Requirements .111-.112

Deficiencies in Internal Control  .113

Communicating Internal Control Matters in an Audit     .114

Communications With Regulators .115-.116

Chapter Paragraph

3 Unique Financial Statement Considerations for Not-for-Profit Business-Oriented Health Care Entities .01-.43

Complete Set of Financial Statements .02-.05

Balance Sheet  .06-.08

Statement of Operations .09-.28

Performance Indicator .12-.17

Other Intermediate Subtotals  . .18-.20

Discontinued Operations and Accounting Changes  .21-.22

Revenues .23-.25

Expenses .26-.28

Statement of Changes in Net Assets (or Equity)  . .29-.32

Statement of Cash Flows .33-.37

Notes to the Financial Statements  .38

Subsequent Events  . .39-.41

Example Financial Statements    .42-.43

4 Cash, Cash Equivalents, and Investments .01-.75

Cash and Cash Equivalents     .01-.11

Centralized Cash Management Arrangements  .03-.06

Cash From Restricted Donations  .07

Other Restricted or Designated Cash Amounts  .08-.11

Investments .12-.73

Fair Value Option  .17-.22

Investments in Debt Securities and Certain Equity

Securities With a Readily Determinable Fair Value

That Are Not Recorded Under the Fair Value Option  . .23-.35

Investments in Certain Other Financial Instruments

Without a Readily Determinable Fair Value That

Are Not Recorded Under the Fair Value Option  .36-.38

Investment Pools  . .39-.47

Fair Value Measurements     .48

Impairment of Investments     .49-.59

Securities Lending Activities    .60

Transfers of Assets to an NFP or Charitable Trust for

Investment     .61-.63

Regulation .64

Other Financial Statement Presentation Matters .65-.73

Auditing .74-.75

5 Derivatives .01-.44

Introduction .01-.05

General Guidance  . .06-.07

Accounting for Changes in Fair Value of Derivative

Instruments   .08-.12

Fair Value Hedges  .09

Cash Flow Hedges  .10-.11

Derivatives Not Designated as a Hedging Instrument    .12

Hedge Accounting Requirements  .13-.28

Shortcut Method .20-.28

Hybrid Instruments, Host Contracts, and Embedded Derivatives   .29-.37

Calls and Puts in Debt .33-.34

Derivatives Embedded in Split-Interest Agreements   .35-.37

Other Matters   .38-.43

Changes in Fair Value of Hedged Item  .38

Termination of Cash Flow Hedge by Debt Extinguishment  .39

Additional Presentation and Disclosure Requirements for

NFP Business-Oriented Health Care Entities .40-.43

Auditing .44

6 Property and Equipment and Other Assets .01-.53

Overview .01-.05

Capitalized Interest  . .06-.11

Supplies, Rebates, and Discounts  .12-.13

Lessee Involvement in Fixed Asset Construction .14-.17

Asset Retirement and Environmental Remediation

Obligations  .18-.20

Impairment or Disposal .21-.31

Discontinued Operations  .28-.31

Nonreciprocal Transfers .32-.34

Other Long-Lived Assets .35-.43

Financial Statement Presentation  . .44-.47

Auditing .48-.53

7 Municipal Bond Financing .01-.107

Introduction .01-.13

Conduit Bonds That Trade in Public Markets  . .06-.08

Credit Enhancement .09-.11

Issuance of Municipal Bonds  . .12-.13

Extinguishment and Modification Transactions  . .14-.17

Calls and Mode Conversions    .18-.39

Defeasance  .20-.26

Modifications     .27-.31

Gain or Loss on Debt Extinguishment .32-.33

Debt Issuance Costs Incurred in Connection With an

Exchange or Modification of Debt Instruments .34-.36

Puts or Tender Options .37-.39

IRS Considerations  . .40-.44

Chapter Paragraph

Financial Statement Presentation and Disclosure  .45-.72

Balance Sheet    .45-.63

Statement of Operations  .64-.65

Disclosures   .66-.72

Obligated Group Reporting     .73-.74

Interim Financial Reporting  .75-.76

Auditing .77-.106

General .77-.85

Auditor Involvement With Municipal Securities Filings    .86-.96

Letters for Underwriters   .97-.103

Attestation Engagements Related to Securities Issuance  . .104-.106

Appendix—Municipal Securities Regulation    .107

8 Contingencies and Other Liabilities .01-.128

Contingencies and Commitments  .02-.61

The Essentials of Recognition, Measurement, and

Disclosure for Contingencies  .03-.09

Managing Risk of Loss .10-.12

Medical Malpractice .13-.47

Disclosures for Medical Malpractice .48-.53

Physician Guarantees and Other Agreements With

Physicians     .54-.61

Other Liabilities     .62-.85

Asset Retirement Obligations  . .62-.64

Compensation and Related Benefits .65-.76

Joint and Several Liability Arrangements     .77-.81

Agency Funds    .82-.83

Fees Paid to the Federal Government by Health Insurers  . .84-.85

Tax Considerations for NFP Health Care Entities  .86-.100

Private Inurement and Intermediate Sanctions  .93-.94

Unrelated Business Income    .95

State and Local Taxes .96

Tax Positions     .97-.98

Medicaid Voluntary Contribution or Taxation Programs  . .99-.100

Risks and Uncertainties .101-.107

Auditing Contingencies and Other Liabilities    .108-.126

Auditing Medical Malpractice Loss Contingencies   .109-.112

Auditing Accounting Estimates  .113-.118

Use of Actuaries and Actuarial Methods     .119-.122

Evaluating Lawyers’ Responses  .123-.126

Income Taxes   .127

Auditing Considerations .128

Chapter Paragraph

9 Net Assets (Equity) .01-.38

Investor-Owned Health Care Entities .01

Not-for-Profit Entities  . .02-.25

Net Asset Classes  .05-.18

Reclassifications  . .19-.25

Classification of Donor-Restricted Endowment Funds .26-.32

Disclosure .33-.37

Auditing .38

10 Health Care Service Revenue and Related Receivables .01-.60

Overview of the Health Care Environment     .01-.15

Rate Setting With Third-Party Payors .05-.10

The Government Payer Environment .11-.14

Charity Care     .15

Types of Health Care Revenue    .16

Types of Payment Methodologies  .17

Patient (or Resident) Service Revenue .18-.36

Revenue Recognition .18-.29

Accounting and Financial Reporting Requirements   .30-.36

Premium and Capitation Revenues  .37-.40

Patient Receivables  . .41-.45

Estimated Final Settlements  .46-.54

Auditing .55-.60

Accounts Receivable Confirmations .58-.60

11 Contributions Received and Made .01-.66

Distinguishing Contributions From Other Transactions  .03-.08

Contributions Received .09-.32

Expiration of Donor-Imposed Restrictions    .12-.14

Promises to Give in Future Periods (Pledges)  . .15-.24

Contributions of Long-Lived Assets, the Use of Long-Lived

Assets, or Resources to Acquire Them    .25-.27

Contributed Services .28-.32

Reporting the Cost of Special Events and Other

Fund-Raising Activities .33-.40

Naming Opportunities .36-.39

Investments Gain or Loss Related to Donor-Restricted

Contributions  . .40

Transfers of Assets to an NFP or Charitable Trust That

Raises or Holds Contributions for Others    .41-.48

Contributions Made  . .49

Other Considerations  .50-.58

Auditing .59-.65

Appendix—Q&A Section 6400, Health Care Entities  .66

12 The Reporting Entity and Related Entities .01-.118

Overview .01-.02

Reporting by NFP Health Care Entities .03-.58

Relationships With Another NFP .06-.25

Relationships With a For-Profit Entity .26-.48

Special Entities    .49-.58

Reporting by Investor-Owned Health Care Entities .59-.62

Presentation of Consolidated and Combined Financial

Statements   .63-.73

Accounting for Transfers Between Related Entities .74-.87

Equity Transfers    .75-.78

Equity Transactions  .79-.82

Other Transfers    .83-.87

Disclosure .88-.89

Mergers and Acquisitions   .90-.116

Merger of NFPs  . .96-.97

Acquisition by an NFP .98-.110

Acquisition by an Investor-Owned Entity, Including a

For-Profit Subsidiary of an NFP Health Care Entity    .111-.114

Disclosures   .115

Acquired Entities  . .116

Auditing .117

Appendix—Flowcharts .118

13 Financial Accounting and Reporting for Managed Care Services .01-.30

Overview .01-.02

Recognition and Classification of Revenue     .03-.12

Capitation Arrangements     .07

Accounting for Health Care Costs .08-.12

Accounting for Loss Contracts    .13-.17

Consideration of Anticipated Investment Income .17

Accounting for Stop-Loss Insurance .18-.19

General and Administrative Expenses .20

Acquisition Costs    .21-.22

Financial Statement Display Considerations    .23-.29

Balance Sheet    .23-.24

Income and Cash Flow Statement .25-.29

Disclosures .30

14 Financial Accounting and Reporting by Continuing Care

Retirement Communities .01-.49

Overview .01-.05

Types of Contracts  . .06-.10

Advance Fees    .08

Chapter Paragraph

Periodic Fees     .09

Use Fees .10

Types of Living Accommodations  .11-.12

Fees and Payment Methods     .13-.15

Accounting for Refundable Advance Fees  .16-.20

Accounting for Fees Refundable to Residents Only From

Reoccupancy Proceeds of a Contract Holder’s Unit  .21-.23

Accounting for Nonrefundable Advance Fees  . .24-.25

Classification of Refundable Advance Fees     .26-.30

Accounting for the Obligation to Provide Future Services

and the Use of Facilities to Current Residents  .31-.35

Accounting for the Costs of Acquiring Initial

Continuing-Care Contracts    .36

Financial Statements  .37-.43

Auditing .44-.49

15 Unique Considerations of State and Local Government Health Care Entities .01-.206

Introduction .01-.02

Applicability of This Chapter    .03-.04

GAAP Hierarchy for Governmental Health Care Entities    .05-.11

Applicability of FASB and AICPA Pronouncements   .09-.11

Basic Financial Statements  .12-.33

Statement of Net Position     .13-.18

Statement of Revenues, Expenses, and Changes in Net Position  .19-.26

Statement of Cash Flows  .27

Segment Reporting  .28-.29

RSI, Including MD&A .30-.33

Measurement Attributes .34-.35

Cash, Cash Equivalents, and Investments  .36-.58

Cash and Cash Equivalents    .36-.38

Investments and Certain Equity Interests     .39-.58

Derivatives .59-.65

Property and Equipment and Other Assets     .66-.85

Capital Assets—General  .67-.70

Capital Asset Impairment     .71-.73

Intangible Assets  . .74-.76

Excess Consideration Provided in a Governmental Acquisition (Known as Goodwill in Nongovernmental Entities)   .77-.79

Leased Assets    .80

Service Concession Arrangements .81-.84

Chapter Paragraph

Disclosures   .85

Municipal Bond Financing and Other Long-Term Debt  .86-.94

Debt Defeasance and Extinguishment   .89-.92

Debt Issuance Costs .93

Disclosures   .94

Contingencies and Other Liabilities .95-.122

Insurance-Related Contingencies .95-.101

Nonexchange Financial Guarantees .102-.104

Asset Retirement and Pollution Remediation Obligations .105-.106

Other Contingencies .107

Compensation and Related Benefits .108-.118

Tax Considerations  .119-.120

Disclosures   .121-.122

Net Position .123-.132

Financial Reporting of Net Position .131-.132

Health Care Service Revenue and Receivables  .133-.136

Contributions and Other Nonexchange Transactions   .137-.147

The Reporting Entity and Related Entities   .148-.190

Identifying Component Units  . .150-.154

Presentation of Component Units .155-.162

Equity Interests    .163-.169

Institutionally-Related Foundations .170-.175

Government Combinations    .176-.190

General Auditing Considerations for Governmental Health Care Entities     .191-.204

Independent Auditor’s Reports  .197-.198

Supplementary Information and Supporting Information, Including RSI  . .199-.206

Supplement A—Statement of Position 00-1, Auditing Health Care Third-Party Revenues and Related Receivables

Appendix

A Overview of Statements on Quality Control Standards

B References to AICPA Technical Questions and Answers

C The New Revenue Recognition Standard: FASB ASC 606

D Accounting for Financial Instruments

E Information Sources

F Category B Guidance

G The New Leases Standard: FASB ASU No. 2016-02

H The New Not-for-Profit Financial Reporting Model Standards: FASB ASU No. 2016-14

I Schedule of Changes Made to the Text From the Previous Edition

Glossary

Index of Pronouncements anOther Technical Guidance

Subject Index