Accounting Standard Updates

Transcription

1 Accounting Standard Updates HFMA Spring Conference 2018 Presented by: Kimberly Sokoloff, Health Care Assurance Services Senior Manager Elizabeth Lasnier, Health Care Assurance Services Manager

2 Presenters Kimberly Sokoloff, CPA Senior Manager National Health Care Practice 1 Elizabeth Lasnier, CPA Manager National Health Care Practice Elizabeth.Lasnier@mossadams.com

3 Agenda Revenue Recognition FASB Grants and Contracts Project Leases NFP Financial Statements Financial Instruments 2 Other Recent ASUs Q & A

4 Recently Issued FASB Standards

5 Upcoming Effective Dates: The Big Three for NFP Healthcare (Annual FS) Not-for-Profit Financial Statements Revenue Leases 4 CY 2018* (All) CY 2018* (Public) CY 2019* (Non-public) CY 2019* (Public) CY 2020* (Non-public) *or FYs beginning in those years NOTE: Public for Revenue and Leases includes NFPs with public debt (conduit or direct)

6 Revenue Recognition

7 Revenue Recognition Scope All contracts with customers, except Lease contracts Insurance contracts Financial instruments Guarantees Nonmonetary exchanges in the same line of business to facilitate sales to customers 6 Contracts not with customers are excluded Contributions Collaborative arrangements

8 Revenue Recognition Model Core principle: Recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Steps to apply the core principle: 7 1. Identify contract(s) with the customer 2. Identify performance obligations 3. Determine transaction price 4. Allocate transaction price 5. Recognize revenue when (or as) a performance obligation is satisfied

9 Revenue Recognition Disclosures 8 Contracts with Customers Performance Obligations Practical expedients and accounting policy elections Revenue recognized from contracts with customers vs. other revenue sources Impairment losses recognized on receivables or contract assets Performance obligation timing* Significant payment terms* Nature of promised goods or services* Obligations for returns, refunds, warranty* CY revenue for PY obligation* Significant financing component* Cost of obtaining a contract* Portfolio approach Invoice method Immaterial promises Shipping and handling Sales taxes Loss contract unit of account * Mostly optional for nonpublic entities

10 Revenue Recognition Disclosures 9 Disaggregation of revenue Information about contract balances Remaining performance obligations Qualitative and quantitative* disaggregation of revenue into categories that depict how revenue and cash flows are affected by economic factors Opening and closing balances Amount of revenue recognized from contract liabilities* Timing of performance obligation vs. pay* Explanation of significant changes in contract balances* Transaction price allocated to remaining performance obligations* Quantitative or qualitative explanation of when amounts will be recognized as revenue* * Mostly optional for nonpublic entities

11 Revenue Recognition Disclosures 10 Remaining performance obligations: Optional exemptions Optional exemption disclosures Significant judgments Short-term contract exemption As-invoiced exemption Sales- or usage-based royalty exemption Directly allocable variable consideration to wholly unsatisfied obligation exemption Optional disclosures elected, nature of obligation, remaining contract direction, additional consideration details Timing of satisfaction of performance obligations* Transaction price and amounts allocated to performance obligations* Contract costs Contract cost assets and changes* Interim requirements Quantitative disclosures* * Mostly optional for nonpublic entities

12 Considerations for Disaggregation of Revenue Payor category (Medicare, Medicaid, Commercial, Self- Pay, etc.) Timing of transfer of goods or service 11 Example categories Service type (inpatient, outpatient, home health, etc.) Contract type (fee for service, capitation, etc.) Geography

13 Disclosure Requirements Disaggregated Revenue Revenue Disaggregation by Payor The composition of patient care service revenue by primary payor for the years ended December 31 is as follows: 12 20x2 20x1 Medicare $16,000 $15,000 Medicaid 6,000 5,000 Managed care 11,000 10,500 Commercial insurers 4,000 3,500 Uninsured 1,800 1,900 Other 1,000 1,000 $39,800 $36,900 Source: AICPA Health Care Entities Revenue Recognition Implementation Issue Paper #8-6 Presentation and Disclosure. As of January 2018, this paper has not been finalized in the AICPA Audit & Accounting Revenue Recognition Guide.

14 Disclosure Requirements Disaggregated Revenue Revenue Disaggregation by Region, Service Line, Reimbursement, Timing 13 Services lines: Hospital-inpatient Hospital-outpatient 20x2 Northeast Central Southeast Total $ 3,500 4,500 $ 1,000 2,000 $ 3,000 2,000 $ 7,500 8,500 Physician services 3,000 3,000 5,000 11,000 Home health and hospice Retail sales Other Method of reimbursement: Fee for service Capitation and risk sharing Other Timing of revenue and recognition: 1,000 2, , ,000 4, ,800 8,000 1,000 $ 14,400 $ 9,000 $16,400 $39,800 $ 8,900 3,100 2,400 $ 14,400 $ 5,300 1,500 2,200 $ 9,000 $ 6,000 6,000 4,400 $ 16,400 $ 20,200 10,600 9,000 $39,800 Health care services transferred over time $12,400 $ 7,000 $12,400 $31,800 Retail pharmacy and equipment sales at point in time 2,000 2,000 4,000 8,000 $ 14,400 $ 9,000 $ 16,400 $39,800 Source: AICPA Health Care Entities Revenue Recognition Implementation Issue Paper #8-6 Presentation and Disclosure. As of January 2018, this paper has not been finalized in the AICPA Audit & Accounting Revenue Recognition Guide.

15 HFMA Spring Conference 2018 List of AICPA Papers on the Issues 14 Final (included in Revenue Recognition Guide): - Self-pay patient balances (Issue 1) - Applying a portfolio approach (Issue 2) - Presentation and disclosures (Issue 6) Exposure period ended, to be finalized soon: - Third-party settlements (Issue 8) - Risk sharing arrangements (bundled payments) (Issue 9) - Performance obligations (Issue 10) Currently or soon to be out for exposure: - Various issues fully or largely related to CCRCs (Issues 3,4,5) - Accounting for contract costs (Issue 7) AICPA Revenue Recognition homepage for Health Care: countingfinancialreporting/revenuerecogn ition/rrtf-healthcare.html

16 Identify the Contract(s) with a Customer A contract is an agreement between two or more parties that creates enforceable rights and obligations. ASC 606 says: Enforceability of the rights and obligations in a contract is a matter of law. Contracts can be written, oral, or implied by an entity s customary business practices. Additionally: 15 collection of substantially all consideration is probable A contract exists if rights of parties and payment terms can be identified it has commercial substance it has approval and commitment of the parties as to their obligations

17 Price Concessions 16 Explicit Price Concessions - Contract discounts - Cash pay schedules - Letter of agreement - Risk-based contract Implicit Price Concessions - EMTALA Role of Medical Screening Exam (MSE) Implicit Price Concession Based on Portfolio Approach - Emergency vs Direct Admits - Contract denials - Charity care - Uninsured - Pending Medicaid eligibility - Dual eligible patients

18 Bad Debt Expense Not Going Away, But Reduced Bad Debt Expense: When a health care entity performs a credit assessment prior to providing services to a patient and expects to collect substantially all of the discounted charges. For example, an elective procedure in which historical experience supports collection of substantially all of the discounted charges. 17 Many health care providers believe their provision for bad debts for services provided to uninsured and insured patients with co-payments and deductibles will be significantly reduced, in comparison to current U.S. GAAP.

19 Portfolio Approach The standard is generally applied on a contract-by-contract basis with a customer. Portfolio Approach 18 Health care entities may use a portfolio approach as a practical expedient, whereby the revenue guidance is applied to a portfolio of contracts with similar characteristics. The portfolio approach is allowed if the entity reasonably expects that the financial statement effects of applying the standard to the portfolio would not be materially different from applying the standard to individual contracts within that portfolio.

20 Application of the Portfolio Approach to Contracts with Patients Considerations for a health care entity to determine in grouping contracts with similar characteristics for inclusion in a portfolio - Type of service inpatient, outpatient, skilled nursing, home health, emergency room, elective procedure, etc. - Type of payors insurance contract, insurance contract with patient responsibility, governmental programs, uninsured self-pay, etc. - Dates when contracts are entered into are close to each other 19 Using a portfolio of similar transactions to make certain estimates and judgments is not the same as applying the portfolio approach practical expedient.

21 Third-Party Settlements Medicare/Medicaid Variable consideration Complex rules Timing Patient is the Customer - Payor contract affects variable consideration 20

22 Third-Party Settlements Variable consideration should be estimated using on of the approaches below Reminder: The selected method should be applied consistently throughout the contract Expected value Most likely amount 21 Sum of probability-weighted amounts in a range of possible consideration amounts Most utilized when there are a large number of possible outcomes The single most likely amount in a range of possible consideration amounts Most utilized when there are two possible outcomes

23 Third-Party Settlements When determining variable consideration amounts, think about: Historical and current reimbursement information, including third-party settlements Historical and current experience with the fiscal intermediary 22 Current charges, allowable costs, and relevant patient statistics Consider all information (historical, current and forecasted) that is reasonably available Update estimates each reporting period Apply one method consistently throughout the contract

24 Third-Party Settlements 23 Evaluate the constraint of variable consideration revenue When assessing whether it is probable that a significant revenue reversal will not occur when the cash collections or payments are made based on final settlement, consider the following: Whether settlement is outside of entity s control (third-party payor controls settlement process) Entity s experience in estimating third-party settlements with government payors Length of time before final settlement is known Whether payment terms may be changed The number of possible consideration amounts consider range of outcomes and whether there have been significant differences from reporting period to reporting period

25 Risk Sharing Arrangements 24 Arrangements with third-party payors should be considered in determining the transaction price for services provided to a patient Customer is the patient Different types of risk sharing arrangements Bundled payment arrangements Pay for performance contracts Contracts with shared savings or shared losses Risk pool contracts Capitation arrangements

26 Revenue Considerations for CCRCs The following key issues related to CCRCs are still under review by the AICPA Healthcare Revenue Recognition Task Force: Recognizing monthly/periodic fees and nonrefundable entrance fees under different contract types Calculating the obligation to provide future services and use of facilities 25 Assessing whether a significant financing component exists for refundable and nonrefundable entrance fees Accounting for contract acquisition costs

27 Grants and Contracts Project: Clarifying the Scope and Accounting Guidance for Contributions Received and Contributions Made

28 Scope Applies to all entities (NFPs and business entities) that receive or make contributions unless otherwise indicated. Excludes transfers of assets from the government to business entities. Applies to both contributions received by a recipient and contributions made by a resource provider. 27 The term used in the presentation of financial statements to label revenue (for example, contribution, grant, donation) that is accounted for within the Scope of Subtopic is not a factor for determining whether an agreement is within the scope of that guidance.

29 Grants and Contracts Background Project added to FASB s Technical Agenda to improve and clarify existing guidance ASU , Revenue from Contracts with Customers, including related disclosures, heightened the issue 28 Raised question as to whether grants and contracts are in scope of that guidance (reciprocal or nonreciprocal) Long-standing diversity in practice in classifying grants and contracts, particularly from governmental entities Issue 1: Reciprocal Versus Nonreciprocal Issue 2: Conditional Versus Unconditional

30 Issue 1: Reciprocal (Exchange) vs. Nonreciprocal (Nonexchange/Contribution) Transactions 29

31 Issue 1: Reciprocal vs. Nonreciprocal Transactions: Key Clarifications to the Scope of Subtopic The proposed ASU would clarify and refine existing guidance in Subtopic by adding paragraphs that would clarify the scope of the Subtopic as well as illustrative examples. The resource provider is not synonymous with the general public, even a governmental entity. If a resource provider receives value indirectly by providing a societal benefit, this would be considered a nonreciprocal transaction. 30 If the primary beneficiary of a grant or contract is a third party, an NFP must use judgment to determine if the transaction is reciprocal or nonreciprocal. Furthering a resource provider s mission or feel good sentiment does not constitute commensurate value received. The type of resource provider should not override the substance of the transaction.

32 20th HFMA Western Region Symposium Issue 2: Conditional vs. Unconditional Contributions For a Donor-Imposed Condition to Exist: 31 Proposed ASU A right to return/release must exist; and Alternative Rejected A right to return/release must exist. The engagement must include a barrier Indicators and examples to help in determination Would have required a probability assessment about whether it is likely a recipient NFP will fulfill the stipulations

33 Indicators to Determine a Barrier To determine what is a barrier, an NFP would consider indicators, which would include, but are not limited to, the following: The inclusion of a measurable performance-related barrier or other measurable barrier. 32 Whether a stipulation is related to the purpose of the agreement. The extent to which a stipulation limits discretion by the recipient. The extent to which a stipulation requires an additional action or actions.

34 NFP Revenue Recognition Decision Process 33

35 Transition Approach Modified prospective - Apply to all agreements o o Existing at the effective date (only apply to the portion of existing agreements not previously recognized) Entered into after the effective date 34 No restatement of prior amounts recognized Retrospective application permitted

36 Effective Date The effective date is the same as the new Revenue Recognition standard (Topic 606), but allows for early implementation. 35 Annual periods beginning after December 15, 2017, including interim periods: Public Business Entities NFP that has issued, or is a conduit bond obligor for, securities that are traded, listed, or quoted on exchange or an over-thecounter market Annual periods beginning after December 15, 2018, and interim periods beginning after December 15, 2019: All other entities

37 Timeline of the Project Issued Proposed Update Comment Period Deadline Final ASU 36 August 3, 2017 November 1, 2017 Q2 2018

38 Leases

39 ASU : Leases (Topic 842) A lease contract conveys the right to use an asset (the underlying asset) for a period of time in exchange for consideration. 38

40 Identifying a Lease (The new primary determinant for on/off balance sheet treatment) That is explicitly or implicitly specified 39 Lease contracts in the scope of Topic 842 involve An identified asset The right to control the use during the lease term Supplier has no practical ability to substitute and would not economically benefit from substituting the asset Decision-making authority over the use of the asset The ability to obtain substantially all economic benefits from the use of the asset

41 Lessee Accounting Overview Balance Sheet Income Statement Cash Flow Statement Finance Right-of-use (ROU) asset Lease liability Amortization expense Interest expense Cash paid for principal and interest payments 40 Operating Right-of-use (ROU) asset Lease liability Single lease expense on a straight-line basis Cash paid for lease payments Classification is similar to that in Topic 840, Leases Recognition and measurement exemption for short-term leases Other than public business entities may use risk-free rates for measurement of all lease liabilities

42 Lessor Accounting Overview Balance Sheet Income Statement Cash Flow Statement Finance Net investment in the lease Interest income and any profit on the lease Cash received for lease payments 41 Operating Continue to recognize underlying asset Lease income, typically on a straight-line basis Cash received for lease payments

43 Leases Getting Ready Inventory of leases What s out there? Know your leases. 42 Materiality How modern is your capitalization policy? Debt covenants To what extent will capitalizing your operating leases affect covenants based on leverage ratios?

44 Leases Getting Ready Review FASB updates Proposed ASU issued in January 2018 would provide transition relief 43 IT systems Does your current system capture all required information? Consider required assumptions and inputs Have you started considering your discount rates, likelihood of exercising options, etc?

45 Not-for-Profit Financial Statements

46 HFMA th Spring HFMA Conference Western Region Symposium NFP Financial Statements ASU Key Objectives (recommended by FASB s NFP Advisory Committee (NAC)) 45 Update, not overhaul, the current model Improve net asset classification scheme Improve information in financial statements and notes about: financial performance, cash flows, and liquidity Better enable NFPs to tell their financial story Issued August 18, 2016, ASU No

47 Net Asset Classification Current GAAP Unrestricted Temp. Restricted Perm. Restricted 46 GAAP Without Donor Restrictions With Donor Restrictions + Disclosures Amount, purpose, and type of board designations * Nature and amount of donor restrictions * New disclosure requirement

48 Examples Net assets: Net assets without donor restriction: Community Health Care $ 2,449 Noncontrolling interests 20 2,469 Net assets with donor restriction: 585 Total net assets $ 3,054 Minimum presentation required 47 Alternative disaggregation allowed Net assets: Net assets without donor restriction: Community Health Care: Undesignated $ 2,000 Designated by Board for capital prospects Noncontrolling interests 449 2, ,469 Net assets with donor restriction: Time restrictions 50 Purpose restrictions 235 Endowment funds Total net assets $ 3,054

49 Net Assets and Related Disclosures Presentation of changes is similar to current guidance except that there are now two classes of net assets as opposed to three. Consistent with current guidance, an NFP will provide information about the nature and amounts of donor restrictions either on the face of the financial statement or the notes. 48 An NFP will now be required to disclose the amounts and purposes of board-designated net assets either on the face of the financial statement or the notes. Underwater endowment funds will be classified within net assets with donor restrictions, as opposed to current guidance, which requires them to be classified within unrestricted net assets. Expanded from current guidance for underwater endowments, an NFP will be required to disclose the aggregate of the original gift amounts (or level required by law or donor), fair value, the aggregate amount of the deficiencies and any governing board policy decision to reduce or not spend from such funds.

50 Expenses Requires all NFPs to present information about their expenses by nature and function either: - In the statement of activities, - As a separate statement, or - In the notes to the financial statements. 49 NFPs required to provide qualitative disclosures about methods used to allocate costs among program and support functions.

51 Expenses Disclosure Example 1 Draft Health Care Services Support Services Acute Ambulatory Physician Post Acute Health Plan Research MG&A Fundraising Total Salaries and benefits $ 1,742 $ 321 $ 688 $ 459 $ 229 $ 229 $ 688 $ 229 $ 4,585 Purchased services ,329 Supplies ,125 Depreciation and amortization Capitated purchased services Rentals and leases Interest Insurance Other $ 3,608 $ 665 $ 1,424 $ 950 $ 721 $ 475 $ 1,424 $ 475 $ 9,742 The financial statements report certain expense categories that are attributable to more than one health care service or support function. Therefore, these expenses require an allocation on a reasonable basis that is consistently applied. Costs not directly attributable to a function, including depreciation, amortization, interest and other occupancy costs, are allocated to a function based on a square footage or units of service basis. Allocated health care services cost not allocated on a units of service basis are otherwise allocated based on revenue.

52 Expenses Disclosure Example 2 Draft Health Care Services Support Services North Region Central Region South Region MG&A Fundraising Total 51 Salaries and benefits $ 1,376 $ 917 $ 1,376 $ 688 $ 229 $ 4,585 Purchased services ,329 Supplies ,125 Depreciation and amortization Capitated purchased services Rentals and leases Interest Insurance Other $ 2,923 $ 1,948 $ 2,923 $ 1,461 $ 487 $ 9,742 The financial statements report certain expense categories that are attributable to more than one health care service or support function. Therefore, these expenses require an allocation on a reasonable basis that is consistently applied. Costs not directly attributable to a function, including depreciation, amortization, interest and other occupancy costs, are allocated to a function based on a square footage or units of service basis. Allocated health care services cost not allocated on a units of service basis are otherwise allocated based on revenue.

53 Investment Return The ASU requires investment return to be reported net of external and direct internal investment expense. NFP s are no longer required to disclose investment expenses that have been netted. An NFP will be precluded from including these investment expenses in the nature-byfunction expense analysis. 52

54 Year 1 Presentation of Net Investment Return 53 Format 1: Revenue $ X,XXX Expenses Operating income XXX XXX Investment return, net XXX Less: Unrealized gains (losses) on other than trading securities excluded from performance indicator (200) Performance indicator XXX Add: Unrealized gains (losses) on other than trading securities excluded from performance indicator 200 Change in net assets without donor restrictions $ XXX Format 2: Revenue $ X,XXX Expenses Operating income Investment return, net excluding unrealized gains (losses) on other than trading securities excluded from performance indicator XXX XXX XXX Performance indicator XXX Unrealized gains (losses) on other than trading securities excluded from performance indicator 200 Change in net assets without donor restrictions $ XXX

55 Cash Flows and Liquidity and Availability Disclosures Cash Flow Statement - Allow free choice between the Direct Method and the Indirect Method o Indirect reconciliation no longer required for Direct Method Liquidity and Availability Disclosures - Qualitative information about how a NFP manages its liquid resources and liquidity risk 54 - Quantitative information about the availability of a NFP s financial assets to meet those cash needs for general expenditures within one year of the balance sheet date

56 Liquidity Example Disclosure Draft 55 The System has certain board-designated and donor-restricted assets limited to use which are available for general expenditure within one year in the normal course of operations. Accordingly, these assets have been included in the qualitative information above. The System has other assets limited to use for donor-restricted purposes, debt service and for the professional and general liability captive insurance program. Additionally, certain other board-designated assets are designated for future capital expenditures and an operating reserve. These assets limited to use, which are more fully described in Notes and are not available for general expenditure within the next year and are not reflected in the amounts above. However, the board-designated amounts could be made available, if necessary. As part of the System s liquidity management plan, cash in excess of daily requirements are invested in in short-term investments and money market funds. Occasionally, the Board designates a portion of any operating surplus to an operating reserve, which was $1,200,000 as of December 31, This fund established by the board of directors may be drawn upon, if necessary, to meet unexpected liquidity needs. Additionally, the System maintains a $5 million line of credit, as discussed in more detail in Note. As of December 31, 2016, $5 million remained available on the System s line of credit.

57 Financial Instruments

58 ASU No (Topic 825), Financial Instruments Classification and Measurement Amendments to Current GAAP Targeted improvements, effective for CY 2019 (FY ); one year earlier for PBEs Financial Assets Equity investments (other than those under the equity method) measured at each reporting period at fair value through net income, with key exception: those without readily determinable fair value only marked to observable price changes No more other-than-trading equity securities 57 Financial Liabilities Fair value change resulting from own credit for financial liabilities measured under fair value option will be recognized through other comprehensive income (OCI)* Disclosures Entities other than public business entities (includes all NFPs) no longer required to disclose fair value of financial instruments not recognized at fair value on balance sheet* *Entities can early adopt these provisions

59 ASU No , Financial Instruments Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments Effective for CY 2021 (FY ); one year earlier for PBEs Contributions (pledges) receivable are excluded Trade receivables and student loans (and other programmatic loans) receivable are included 58 CECL model not expected to result in significant impact on most entities that aren t financial institutions Likely already taking CECL considerations into account for their trade and loan receivables More noteworthy is the change for Available-for-Sale Debt Securities: now an allowance approach

60 ASU No , Hedge Accounting Key Simplifications Effective for CY 2020 (FY ); one year earlier for PBEs; early adoption allowed The concept of separately recording ineffectiveness will be eliminated 59 SIFMA rate will now be among the indexes eligible to be designated in a hedge of interest rate risk Hedge Documentation Initial quantitative effectiveness test can now be performed anytime before issuance of next financial statements (instead of immediately after entering the hedge).* *Public Healthcare NFPs (those that have issued, or are a conduit bond obligor for, securities that are traded, listed or quoted on an exchange or an over-the-counter market) have 3 months to document hedging relationships.

61 ASU No , Hedge Accounting Key Simplifications Shortcut Method Long-haul method may be used if use of the shortcut method was not or no longer is appropriate. 60 Critical Terms Match When hedging a group of forecasted transactions, the timing of the derivative and transactions can be considered to match, if the transactions occur and derivative matures within a 31-day period. Qualitative Testing Allowed after an initial quantitative test at hedge inception if certain conditions are met.

62 AFI Hedge Documentation Private Company Alternative Statement of intent to hedge at inception 61 Hedging instrument Hedge item or transaction Nature of risk being hedged Following will need to be finalized once FS are made available for issuance Method of hedge effectiveness Qualitative or quantitative hedge effectiveness testing

63 Other Recent ASUs 1. Restricted Cash (ASU ) 2. Net Periodic Benefit Cost Presentation (ASU ) 3. Definition of a Business and Goodwill Impairment (ASU and ASU )

64 ASU No , Restricted Cash Effective for CY 2019 (FY ); early adoption permitted Requires the statement of cash flows to explain the change during the period in the total of cash, cash equivalents, restricted cash, and restricted cash equivalents Does not provide a definition of restricted cash or restricted cash equivalents 63 Includes restricted cash and restricted cash equivalents in the beginning and ending totals of the cash flow statement Requires entities to disclose the line items and amounts of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents reported within the statement of financial position

65 ASU No , Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost Effective for CY 2019 (FY ); early adoption permitted Background Net benefit cost contains several components with different nature No GAAP guidance on presentation Reduced predictive value and usefulness of information to users Board added project 64 Presentation of net benefit cost in the income statement (retrospective application) Service cost in the same line item or items as other current employee compensation costs Remaining components in a separate line item or items outside operating items, if applicable Capitalization of only service cost in assets (prospective application)

66 HFMA Spring Conference 2018 Other Recent ASUs ASU No , Clarifying the Definition of a Business Provides a more robust framework to determine when a set of assets and activities is a business and more consistency in applying the guidance, reducing application costs, and increasing operability in practice Effective for CY 2019 (FY ); early adoption permitted, with limitations 65 ASU No , Accounting for Goodwill Impairment Changes the test for goodwill impairment to a one-step quantitative impairment test whereby a goodwill impairment loss is measured as the excess of a reporting unit s carrying amount over its fair value Effective for CY 2022 (FY ); early adoption permitted

67 Recently Issued Standards (ASU)/FASB - ASU Revenue - ASU Fair Value Hierarchy Levels for Certain Investments Measured at Net Asset Value (Topic 820) - ASU Simplifying the Accounting for Measurement Period Adjustments - ASU Income Taxes (Topic 740) 66 - ASU Financial Instruments (Subtopic ) - ASU Measurement of Credit Losses on Financial Instruments - ASU Financial Leases - ASU Not-for-Profit Entities (Topic 958)

68 Recently Issued Standards (ASU)/FASB (Continued) - ASU Equity Method of Accounting - ASU & 18 Statement of Cash Flows (Topic 320) Classification of Certain Cash Receipts and Cash Payments - ASU Not-for-Profit Entities Consolidation 67 - ASU Goodwill Impairment - ASU Net Periodic Benefit Costs - ASU Targeted Improvements to Accounting for Hedging Activities - Proposed Grant vs. Contribution Guidance

69 Questions? 68

70 The material appearing in this presentation is for informational purposes only and should not be construed as advice of any kind, including, without limitation, legal, accounting, or investment advice. This information is not intended to create, and receipt does not constitute, a legal relationship, including, but nor limited to, an accountant-client relationship. Although this information may have been prepared by professionals, it should not be used as a substitute for professional services. If legal, accounting, investment, or other professional advice is required, the services of a professional should be sought. 69 Assurance, tax, and consulting offered through Moss Adams LLP. Investment advisory services offered through Moss Adams Wealth Advisors LLC. Investment banking offered through Moss Adams Capital LLC.