Among the many challenges community health centers (CHC) face, a new accounting standard isn’t one many are eager to tackle. Unfortunately, as federal grantees, CHCs are required to follow generally accepted accounting principles. We recognize such significant and fundamental changes are never easy.

The model for revenue recognition is changing with the Financial Accounting Standards Board’s (FASB) May 28, 2014, release of Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers (Topic 606). The standard is commonly referred to as the “revenue recognition” standard. The ASU eliminates most of the existing industry-specific guidance and significantly expands revenue recognition disclosures. More than 600 pieces of current revenue recognition guidance are replaced with an overriding principle and a five-step model. The standard requires entities to make more estimates and use more judgment than under current guidance.

Effect

Because revenues are a critical financial measure for CHCs, this 156-page ASU will affect your organization through the investment of time and energy to understand, develop and update policies for and implement the standard.

Effective Dates

For public entities, the standard is effective for interim and annual reporting periods beginning after December 15, 2017. All other entities have an additional year for annual reports and two years for interim reporting.

Although it’s easy to assume you get an extra year to implement since your CHC is a not-for-profit entity, CHCs also can be conduit debt obligors and, thus, public entities. If your CHC has bonds or other securities that could potentially be traded, listed or quoted on an exchange or over-the-counter market, be sure to read our BKD Thoughtware® article covering these important considerations.

Resources

To help ease the pain of adoption, our CHC advisors have invested significant time researching the standard to offer you CHC-specific educational opportunities. We’ve developed a series of complimentary webinars designed to help you navigate the essential elements of the ASU as you implement revenue recognition for your CHC. Here’s a quick look at what our webinar series has to offer:

• FASB Revenue Recognition Basics for CHCs
  • We’ll provide an overview of the revenue recognition standard with insight regarding its effect on CHCs.
• FASB Revenue Recognition for CHCs: A Focus on Patient Service Revenue
  • The traditional patient service revenue cycle is the most fundamental part of a CHC. We’ll walk through the five-step model providing guidance for adoption.
• FASB Revenue Recognition for CHCs: A Focus on Financial Reporting
  • A goal of the standard is to improve the usefulness of financial statements. Illustrating the presentation and footnote disclosure will help add clarity to the final product.
• FASB Revenue Recognition for CHCs: A Focus on Other Affected Revenue Streams
  • Given this is a comprehensive revenue recognition standard, there are many other CHC revenue sources affected. We’ll discuss how capitation, meaningful use, third-party settlements, etc., are affected.

Interested in attending our upcoming webinars? Subscribe to BKD Thoughtware to get the invitations sent straight to your inbox or contact David for more details.