Memos Provide Greater Insight into Financials

Merritt Research Services populates values in the Financial Data screen, which are then used to generate formulas and ratios designed to paint an accurate picture of a Credit's current financial condition. These calculations reflect liquidity, fiscal condition, working capital, leverage, coverage, and profitability. These formulas, ratios, and values that comprise them play an important role in credit analysis, but leave room for misinterpretation when considered out of context. The Notes contained within Audited Financial Statements often provide an abundance of information that may not be...

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Category: CreditScope, 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

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

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

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

Have You Updated Your CreditScope Demographic Data Lately?

Demographic trends can paint a vivid picture of a state or local economy, often contributing to changes in a Credit's finances. The CreditScope database includes demographic data compiled from three sources: the U.S. Bureau of Labor Statistics (BLS), the U.S. Bureau of Economic Analysis (BEA), and the U.S. Census Bureau. Census Bureau information is comprised of the Decennial Census of Population and the American Community Survey (ACS), which "surveys a small percentage of the United States to produce yearly estimates on the nation's social, economic, and housing characteristics." Merritt is...

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Category: CreditScope, Demographics, Merritt Data

Current Portion of Long-Term Debt versus Short-Term Debt Fields in CreditScope

The Current Portion of Long-Term Debt [CurPorLTD] field is populated with the scheduled principal payments for debt that is issued on a long-term basis - i.e., debt which is not due in its entirety within the next fiscal year. This field would also include any accelerated payments due to default or noncompliance. The Short-Term Debt field can be found in the database as [STD] for most revenue-backed sectors or [STDGov] for most tax-backed sectors. It is populated with short-term debt that is outstanding at fiscal year end. The field does not account for any short-term borrowings that were...

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Category: CreditScope, Merritt Data

Wading Through the Debt Analysis of Tax-Backed Credits...

A Primer on Merritt's Approach to Tax-Backed Debt Statements Generating consistent, accurate, and comparable financial information is of the utmost importance to Merritt Research Services. In order to achieve this goal, it is paramount that we clearly define each of our fields. Nowhere is this more important than the debt analysis section of the tax-backed sectors. These fields are often difficult to standardize due to the variations of presentation and the abundance of long term debt vehicles available to municipal issuers. Regardless of the presentation, the guidelines below should help...

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Category: CreditScope, Merritt Data

What Goes Into Cash & Short-Term Investments?

Merritt Research Services strives to paint the most accurate picture of a Credit's financial condition based on information provided in audited financial statements and notes contained therein. Because the dollar amount of Cash & Short Term Investments is used to calculate several salient liquidity ratios in the CreditScope database, it is particularly important to note that only unrestricted and highly liquid cash and short-term investments are included in this field. Merritt typically does not include any cash reserved for collateral, held by fiscal agents, or trustee-held restricted...

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Category: CreditScope, Merritt Data

Tax Base Data

Merritt Research Services provides tax base data for credits within the City, County, and School District sectors. Tax base data is found in the Comprehensive Annual Financial Report (CAFR) in the Statistical Section, which typically provides an abundance of information relating to economics and demographics. When entities do not provide tax base data in their CAFR, Merritt will utilize public documents from other sources, including Official Statements and Continuing Disclosure Documents which may be obtained through Electronic Municipal Market Access (EMMA). Tax base data provides an...

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Category: CreditScope, Merritt Data

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