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ACC 548 Week 6 Individual Assignment Comprehensive Annual Financial Report.ppt




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To: CPA Senior Partner
Subject: Reporting Requirements
This memo is prepared with two objectives as follows:
1. To provide analysis reporting requirement both of a small county hospital (SCH) and a
private not-for-profit nursing home (PNH).
2. To provide comparison and contrast accounting practices between the two entities.
Analysis Reporting Requirements for a Small County Hospital
Based on the standard setting of authoritative body, a small county hospital as a special purpose
entity has to follow the accounting and reporting standards of GASB Statement 34 (Category A
GAAP) and the AICPA Health Care Guide (Category B GAAP).
Consequently, the components of financial report the SCH has to prepare statements: Statement
of Net Assets, Statement of Revenues, Expenses, and Changes in Fund Net Assets, Statement of
Cash Flows. In addition to statement includes: Management Discussion and Analysis (MD&A),
Notes to the Financial Statements, and Required Supplementary Information other than MD&A.
This SCH chooses as enterprise activity uses accrual basis accounting and economic
measurements focus with modifications as required by the AICPA Health Care Guide.
Consequent to the Health Care Guide, the SCH has different equity accounts than non-
governmental entities.
* Cash Flows, the SCH use the four category GASB format of cash flows: (1) from operating

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activities; (2) from noncapital financing activities; (3) from capital and related financing
activities; and (4) from investing activities with its reconciliation of net operating revenues to net
cash provided by operating activities.
* Statement of net assets (Balance sheet) presentation required classification of current and
non-current of assets and liabilities. Equity section presents: Net Assets Invested in Capital
Assets, Care Organizations Net of Related Debt, Restricted Net Assets, and Unrestricted Net
* Statement of Revenues, Expenses, and Change in Fund Net Assets required the statement of
operations and must include a performance indicator that distinct reports results of operating and
non-operation of revenue and expenses.
* Items should not be included: Internal transaction other than in exchange for services,
unrealized gains/losses on investment other than those classified as trading securities, a such as
identified by FASB.
* Revenue: Patient service revenue be reported net of estimated adjustments and does not
include charity care. Include note disclosures of method revenue recognition and management’s
policies for providing charity care and notes charity care provided. Operating revenues cover
patient service revenue, premium revenue based on agreement for a fixed fee, other revenue from
parking fees, gift shop, cafeteria, and tuition. The unrestricted gifts; investment income for
current unrestricted purposes be classified according to the policy there in.
Expenses follow natural classification or their functional classifications. Property, plant, and
equipment acquired by restricted or unrestricted resources could be initially recorded as
temporarily restricted or as unrestricted, and then reclassified in accordance with the depreciation

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Analysis Reporting Requirement for a Private Not-for-Profit Nursing Home
The FASB is responsible for setting the reporting requirements for private, not-for-profit
organizations such as the nursing home that is under consideration. Private not-for-profit
organizations are commonly financed through voluntary contributions – as a result, the financial
statements are intended primarily for use by its donors. Private not-for-profit organizations are
required to comply with unique standards that result from the contributions by its donors as well
as typical FASB standards.
Private not-for-profits use the accrual basis of accounting to report both current and long-term
assets and liabilities as well as to measure revenues and expenses. FASB Statement 117
established the standardized not-for-profit financial statements - three statements are required by
the FASB: Statement of Financial Position, Statement of Activities, and Statement of Cash
* The Statement of Financial Position reports assets, liabilities, and net assets. Net assets are
broken down into unrestricted, temporarily restricted, or permanently restricted assets.
* The Statement of Activities reports revenues, expenses, gains losses and reclassifications.
Separate columns are kept for each class of net assets. Contributions are recorded as revenue in
the appropriate net asset class. All expenses are recorded and reported as unrestricted expenses
and are accounted for by decreasing unrestricted net assets.
* The Statement of Cash Flows uses the standard FASB categories (operating, investing, and
financing) and can be prepared using either the direct method or the indirect method.
* Classifications In addition to these three statements, a statement of functional expenses is
required for voluntary health and welfare organizations. The statement of functional expenses

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Very useful material for studying!