If you haven’t already, all CHCs issuing GAAP financial statements must adopt Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers, and ASU 2018-08, Not-for-Profit Entities: Clarifying the Scope and the Accounting Guidance for Contributions Received and Contributions Made, in the coming year. With many CHCs already in the year of adoption, the time to prepare for and successfully implement these ASUs is quickly passing.
Have You Studied Up On What This Means for Your CHC?
Before you can adopt the new standards or even develop an implementation plan, you must first understand how the ASUs affect your financial statements and internal control over financial reporting. The new revenue recognition guidance found in ASC 606 replaces substantially all existing guidance, including the health care and not-for-profit industry-specific guidance we’ve applied to CHCs in the past. ASU 2014-09 also highlighted diversity in practice in the application of existing guidance on distinguishing between contributions and exchange transactions, which led FASB to issue ASU 2018-08. Implementation of ASU 2018-08 is anticipated to have a significant effect on financial statements and disclosures, specifically for entities with government grants and contracts, such as CHCs.
If you feel like you’re missing a foundational understanding of these new standards, we recommend watching BKD’s revenue recognition webinar series and Accounting for Grants & Contributions webinar, prepared specifically for CHCs:
Once you have an understanding of the new standards, you should review your revenue streams and determine the guidance applicable to each. If you think implementing these ASUs can be accomplished in a weekend, those who have already adopted will tell you a very different story. Implementation of the new revenue recognition standard is most likely going to require an investment of time from both your accounting and billing departments. The clarified contributions standard is going to require reading through each and every grant, contract or contribution to determine the appropriate accounting.
If you don’t have sufficient time to invest in these projects, consider engaging trusted advisors to assist in managing the project, providing education and research, analyzing your revenue streams and portfolios, extracting and validating data for use in portfolio development and/or drafting of policies, internal control documentation and financial statement disclosures.
Is Your CHC Ready for the New Revenue Recognition & Clarified Contributions Standards?
BKD has served as the trusted advisor to several CHCs through implementation and is committed to sharing the lessons learned along the way. Take it from a CHC CFO who has already been through adoption:
Adopting and implementing ASC 606 and 958 were far more time consuming than our finance department had initially thought. Fortunately for us, we were able to utilize the library of resources BKD had developed and disseminated on their website. The webinars, workflows, evaluation forms and policies and procedures their team developed were pivotal in our ability to make the necessary changes to maintain compliance.
Nick Cutler, CFO, Hill Country Health and Wellness Center
To kick off our Lessons Learned series, we’ve created the CHC Revenue Recognition Readiness Assessment to help you gauge your preparedness for implementing these standards. For example, as we’ve provided assistance to CHCs implementing these standards so far, we’ve found the existing allowance methodology of some CHCs isn’t too far from compliance with the new standards, and the Medicaid reimbursement methodologies in some states are going to make implementation easier. While some questions in the assessment do test your knowledge, our purpose with this tool is to help you calculate how much time and effort it may take your CHC to comply with the new standards.
For specialized training or assistance with implementation, complete the Contact Us form below or reach out to your BKD trusted advisor. Subscribe to our CHC newsletter to be the first to know about content prepared by our pros specifically for your health center.