On What Basis Are You Accounting for That? Part Six: Regulatory Basis of Accounting

A reporting entity uses the regulatory basis of accounting when the entity is subject to a governmental regulatory agency's jurisdiction. The regulatory basis of accounting is a comprehensive basis of accounting other than accounting principles generally accepted in the United States. Regulatory basis accounting rules and guidelines vary from one regulatory agency to another. The regulatory basis of accounting is used in about four percent of the City, County and School District credits in CreditScope. The majority of the regulatory basis of accounting credits in CreditScope are put in...

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Category: Accounting

Accounting for Infrastructure

Infrastructure assets are long-lasting capital assets that add value to land and tend to be part of a larger system. Some common types of infrastructure assets are bridges, dams, tunnels, streets, sidewalks, water mains, and lighting systems. Infrastructure assets are accounted for under capital assets as either non-depreciable, depreciable or both. The approach for reporting infrastructure assets can vary from one government to another, as allowed by accounting standards. Infrastructure assets can be reported using the following approaches: Traditional Depreciation Approach -...

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Category: Accounting, CreditScope

On What Basis Are You Accounting for That? Part Five: Modified Cash Basis of Accounting

The modified cash basis of accounting is a hybrid of accrual and cash basis accounting. Modified cash basis uses the cash basis of accounting but then modifies certain aspects of the cash basis of accounting. For example, using the modified cash basis of accounting, an entity may choose to capitalize property, plant, and equipment and record depreciation expense and accumulated depreciation. In a pure cash basis, depreciation and accumulated depreciation would not be recognized, but a cash disbursement would be shown on the income statement for the property, plant and equipment that was...

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Category: Accounting

On What Basis Are You Accounting for That? Part Four: Cash Basis of Accounting

Cash basis of accounting recognizes revenue at the time when cash has been received, and recognizes expenses when cash has been paid. Cash revenues may not be recorded at the same time that expenses were used to raise those revenues. For example, an entity may not have received cash for performing a service during a specific reporting period, but may have incurred expenses that will result in future cash revenues to be reported during a later reporting period. Or, in another instance, an entity might receive a cash payment for services rendered during a particular reporting period, but has...

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Category: Accounting

On What Basis Are You Accounting for That? Part Three: Modified Accrual Basis of Accounting

A government typically provides Government-Wide Financial Statements and Governmental Funds Financial Statements. The Government-Wide Financial Statements use the accrual basis of accounting while the Governmental Funds Financial Statements use the modified accrual accounting. Modified accrual basis of accounting measures the current financial resources available. It is basically a hybrid of accrual and cash basis of accounting. Fixed assets, such as property, plant and equipment, and long-term debt are not recognized in this accounting basis on the balance sheet because they are not...

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Category: Accounting

New Disclosure Standards for Charity Care

Prior to the amendments made in the Financial Accounting Standards Board (FASB) Accounting Standards Update No. 2010-23, Measuring Charity Care for Disclosure in August 2010, existing guidance did not prescribe a specific measurement basis for a health care entity to disclose charity care. Health care entities were required to disclose amounts related to their charity care policy, but the methodology for doing so was left up to each entity. Most often, this was a 'charges foregone for services and supplies' furnished under the entities' charity care policy. The charges foregone amounts...

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Category: Accounting, Merritt Data

On What Basis Are You Accounting for That? Part Two: Accrual-Based Accounting

Simply put, accrual-based accounting recognizes revenues when earned and expenses when incurred. An entity may recognize revenues or expenses using an accrual-based accounting system even if cash has not yet been exchanged. In other words, the entity includes revenue earned once the service has been performed or the product has been shipped. The entity recognizes whatever expenses were incurred to earn those revenues even if it has not moved any cash to pay for those expenses. Government-Wide Financial Statements and Enterprise Funds follow the accrual-based accounting for entities...

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Category: Accounting

Bad Debts to Reduce Net Patient Revenue (rather than increasing Net Operating Expense) for Hospitals

In July 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update 2011-07, Health Care Entities (Topic 954), Presentation and Disclosure of Patient Service Revenue, Provision for Bad Debt, and the Allowance for Doubtful Accounts for Certain Health Care Entities. The amendments in the Update change the presentation of the statement of operations. The provision for bad debts for patient service revenue is required to be presented on a separate line as a deduction from patient service revenue. The new presentation will show net patient service revenue that is...

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Category: Accounting, Merritt Data

GASB 54 Clarifies Fund Balance Distinctions

Fund balance refers to the difference between assets and liabilities in the governmental funds balance sheet. This information is one of the most widely used elements of state and local government financial statements. Users of financial statements examine fund balance information for a variety of reasons such as identifying the available resources that can be used to repay long-term debt, or determining whether a government has the necessary resources to pay for new programs, or the continuance or expansion of existing programs. Fund balance carries the potential to be misunderstood, even...

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Category: Accounting, Merritt Data

On What Basis Are You Accounting for That?

Generally Accepted Accounting Principles (GAAP) is a set of accounting principles, standards and procedures that organizations use to compile their financial statements. GAAP is a collection of authoritative standards set by policy boards such as the Financial Accounting Standards Board (FASB) or the Governmental Accounting Standards Board (GASB). GASB is responsible for setting accounting standards for state and local governments and their governmental agencies, while FASB is responsible for setting accounting standards for all other organizations, including nongovernmental, nonprofit...

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Category: Accounting

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