Chapter 2

Performance Indicator

The FASB defines it as an intermediate level that reports the results of operations. Operations includes operating and nonoperating items. Required by FASB in not-for-profits on all of their statements of operations

3 categories of net assets

Unrestricted Temporarily restricted Permanently restricted

Are accrued expenses reflected in the balance sheet?

Yes, accrued expenses are liabilities and, therefore, are reflected in the balance sheet

Supplies/Inventory

small-dollar items that will be used up or fully consumed within one year or less.

Whereas the balance sheet is a snapshot of the organization, the statement of operations presents a _____ of revenues and expenses over a period of time

summary

Amortization

the allocation of the acquisition cost of debt to the period that it benefits

Current Liabilities

Financial obligations due within one year

What is in the body section of the main balance sheet for a not-for-profit HCO? (Exhibit 2.2, p.31)

Assets (current and noncurrent) = total assets Liabilities (current and noncurrent) = total liabilities Net Assets (unrestricted, temp restricted, permanently restricted) = total net assets Total liabilities and net assets

What is in the body section of the main balance sheet for an investor-owned HCO? (Exhibit 2.2 , p. 31)

Assets (current and noncurrent) = total assets Liabilities (current and noncurrent) = total liabilities Stockholders' equity (common stock and retained earnings) = total stockholders' equity Total liabilities and Stockholders' equity

Operating Income

a classification within the excess of revenues over expenses, which separates revenues earned through health care-related earnings (operating income) and other healthcare related activities (nonoperating income)

Depreciation

a measure of the extent to which a tangible asset has been used up or consumed

The statement of operations uses the ____ basis of accounting

accrual

Noncontrolling Interest

amount of a partially owned subsidiary entity that the parent does not own

Gross patient accounts receivable (GPAR)

amount owed to the HCO at full charges

Purpose of the Statement of Cash Flows

answers the question, where did the cash come from and where did it go?

Examples of Noncurrent Assets

assets limited as to use, PPE, goodwill, other assets

Net Assets (or Equity)

assets of an entity that remain after deducting its liabilities. In a business enterprise, it is the ownership interest.

Current Assets

assets that will be consumed within a year

What's on the balance sheet for not-for-profit entities?

assets, liabilities, and net assets

What's on the balance sheet for investor owned entities?

assets, liabilities, and stockholders' equity

Financial statements used by investor-owned entities

balance sheet, statement of income and comprehensive income, statement of changes in stockholder equity, statement of cash flows, notes to the financial statements

Financial statements used by not-for-profit entities

balance sheet, statement of operations, statement in changes of net assets, statement of cash flows, notes to financial statements

Examples of current assets (in order of liquidity)

cash and cash equivalents investments (short-term) assets limited as to use A/R Inventories, prepaid expenses

Components of the body of the Statement of Cash Flows

cash flows from operating expenses cash flows from investing activities cash flows from financing activities net increase(decrease) in cash and cash equivalents

what two things must be deducted from GPSR?

contractual allowances and charity care discounts

Examples of Current Liabilities

current portion of long-term debt A/P and accrued expenses Estimated third-party payor settlements

Charity Care Discounts

discounts from GPAR given to patients who cannot pay their bills and who meet the entity's charity care policy

Third-Party Payers

entities that pay on behalf of patients

Net Income

equivalent to excess of revenue over expenses for a not-for-profit entity

Accrued Expenses

expenses that arise in the normal course of business that have not yet been paid

Purpose of the Statement of Changes in Net Assets

explain why there was a change from one year to the next in the entire net asset section of the balance sheet.

Noncurrent Liabilities

financial obligations not due within one year

Liquidity

how quickly an asset can be turned into cash

Why are the financial notes critical?

information in the body of the statement is in summary form, and any additional key info must be presented in the notes

Examples of Cash equivalents

money market funds, certificates of deposits, and treasury securities with original maturities of 3 months or less

Are depreciation and amortization cash expenses?

no

Accounts Payable

obligations to pay suppliers who have sold the health care entity goods or services on credit

What does the balance sheet do?

reports the entity's assets, liabilities, and equity at a particular point in time, usually the last day of the accounting period

Noncurrent Assets

resources of the entity that will be used or consumed over periods longer than one year

Assets

the probable future economic benefits obtained or controlled by a particular entity as a result of past transactions or events. Represent resources that an entity owns. Recorded at their cost, unless donated.

Liabilities

the probable future sacrifices of economic benefits arising from present obligations of a particular entity to transfer assets or provide services to other entities in the future as a result of past transactions or events. Can be debts or obligations

Accumulated Depreciation

the total amount of depreciation taken on an asset since it was put into use

Goodwill

what an entity is buying in an acquisition when it pays cash and assumes liabilities in excess of the fair value of the assets acquired