The Financial Accounting Standard (FAS) Number 116 adjustment referencing Table
5.3-1 means that the adjustment is made for recognition of interest revenues and for pledge
receivables. How contributions are recorded depends on the contribution. For example, there are
three categories that contributions would fall under on the statement of activities: unrestricted,
attached. They lack any restraints from the contributor allowing the funds to be used as needed.
Temporarily restricted funds have donor imposed restrictions. In these cases the restrictions will
be fulfilled either because of a period of time, such as funds available for one year or for a
specific purpose, such as using the funds for new equipment. Permanently restricted funds are
similar to temporarily restricted funds because of the time period or purpose but the restrictions
will remain permanently. Endowments are typically permanently restricted funds. Contributions
are recorded immediately when received no matter if there are restrictions involved or not. In the
cases of restrictions the use of the funds would show the restriction and limit, not how they are
recorded. Contributions are not limited to cash either, they can also be in the form of services or
receivables occur when an organization has provided a service or product and have sent their
customer the bill, but have not been paid yet. For example, if St. Jude provided blood work for a
patient they would send a bill and until a payment has been received the service would be
considered an account receivable. Pledge receivables are promises to contribute cash or non-
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cash, and are recorded immediately even if the money may not be received for a great deal of
time unlike accounts receivable that are typically received within a month from billing date.
There are circumstances when financial statements can quantify volunteer services. If a
volunteer is offering a specialized skill that a company would have had to purchase if they did
not have the volunteer then the volunteer services could be quantified. An important note is that
the value of the service provided would not be determined using earning potential but instead on
their specific work. FASB Statement Number 116 would be helpful to review the impact of the
volunteers work.
affiliated parties because according to the Securities and Exchange Commission (SEC) and the
Financial Accounting Policies Committee (FAPC) “investors and other users of financial
company's commitments and other obligations in order to properly evaluate the firm's risks and
future earning power” (paragraph 4). Therefore, the hospital should ensure they assess any
possible risks with American Lebanese Syrian Associated Charities, Inc. (ALSAC) and provide
When comparing the revenue mix of Universal Health Services, Inc. and St. Jude’s
Children Research Hospital, Inc. ALSAC it is important to first note the main differences in
these two corporations. Universal Health is a for profit company that operates 59 hospitals, while
St. Jude’s/ALSAC is a not-for-profit entity whose main purpose is to provide research for
catastrophic children’s diseases and to treat the children with these diseases. With these
differences, the revenue mixes of the two entities are very different as far as what the revenues
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come from. Universal Health receives revenues from third party payers, such as Medicaid,
Medicare, Managed Care (HMO’s and PPO’s), and a category labeled as other sources. St.
Jude’s/ALSAC, in contrast, receives its revenues from contributions, patient care services
(estimated value of third party payers), grants, and also has a category of other sources. As one
can see, of these two revenue mixes, the only similarities is that both entities do receive
payments from third party payers, however Universal Health receives most all revenues from
The strategies of investor owned companies in managing risk and ensuring adequate
capital as compared to not-for-profits are comparably different. If one relies entirely on the
financial statements and the source of revenues of the two entities for comparison, it is clear that
investor owned companies rely very heavily on third party payers for revenue. Relying heavily
on third party payers such as insurance or Medicaid appears to ensure that a major portion of the
patient’s bills will be paid. A not-for-profit entity, such as St. Jude’s relies very heavily on the
generous donations of others and grants. While St. Jude’s does receive revenue from third party
payers, this is a small percentage compared to the amount of contributions and grants received.
Government-owned
If the government owned and operated the hospital, the government would process
from its revenue and cash flow from the program services, bonds, and taxes instead of soliciting
donations. There would not be any reason for adjustments as contributions or revenue are only
recorded by the government and if they can be collected in 60 days or before the end of the
government's fiscal year. The patient revenue mixture should closely resemble to the United
Health Services. The value of the volunteer's time can be used in the financial statements for
each external and internal purpose. The hospital's financial statement users could be able to also
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read the government's Comprehensive Annual Financial Report (CAFR) and would be able to
separate and understand the interactions between affiliated and related parties.
Upon researching comparing and contrasting revenue mixes the readers will understand
all health fields including organizations that are for profit, not-for-profit organizations, as well as
charitable contributions while others receive revenue while providing health care alone. The
health field receives its revenue differently, but it would not affect the primary goal of providing
References
SEC. (2002). Association for Investment Management and Research Financial Accounting
http://www.stjude.org/SJFile/combined-sjcrh-alsac-audited-fs-fy11.pdf