FASB Accounting Standards Updates

The Financial Accounting Standards Board (the “Board”) issued two accounting standard updates in August 2010.  The first one is Number 2010-23, “Measuring Charity Care for Disclosure”.  This standard has been issued in order to clarify the measurement basis used in the disclosure of charity care in financial statement footnotes.  The Board wanted to clarify how charity care costs should be measured.  With this update, which is effective for fiscal years beginning after December 15, 2010, cost is the measurement basis for charity care disclosure purposes.  Costs can be identified as the direct and indirect cost of providing the charity care.  Most entities will likely use their own cost accounting system including indirect care or a cost report calculation could be used.  The standard also indicates that funds received to offset or subsidize charity services provided shall also be separately disclosed.  Examples include gifts or grants restricted for charity care or from an uncompensated care fund. 

Number 2010-24, “Presentation of Insurance Claims and Related Insurance Recoveries”.  Again, the Board wanted to address diversity in practice relating to the accounting for medical malpractice claims and similar liabilities and their anticipated insurance recovery.  The Board has assessed that most healthcare entities have netted anticipated insurance recoveries against the related accrued liabilities.  With this standard, which is effective for fiscal years and interim periods within those years, beginning after December 15, 2010, healthcare entities should not net insurance recoveries against a related claim liability.  Additionally, the amount of the claim liability should be determined without consideration of insurance recoveries.  Finally, if applicable, a cumulative assessed adjustment should be recognized in opening net assets in the period of adoption if a difference exists between liabilities and insurance receivables recorded as a result of applying this update.  The amendment in this update also presents retrospective application and early application.

We hope this update is useful to you, please let us know if you would like to discuss further. Contact a Feeley & Driscoll Healthcare Accountant to learn more by calling 888-875-9770 or emailing here.

related links