It is paramount and necessary to prepare financial statements and auditions for any organization, and the health care industry cannot be excluded in the exercise. Making financial statements in the health sector is to ensure one understands the complexities in the health care industry which involve the following; revenue recognition methods resulting from medical malpractices claims, patient receivables, reporting entity, financial reporting and accounting for managed care services and also continuing care retirement communities (Anastasia, 2015). In the health care industry, they use AICPA publications for provision of information on latest developments, guidance and practice aids. Illustration of the examples of standard accounting and audit practices are also provided, and they include;
Fair value measurements and disclosures for the non-governmental health care entities, the derivative instruments that are mostly applied in the health care industry and advanced fees that are charged for continuing care retirement community (Anastasia, 2015). The other accounting practices involved are the municipal bonds issued on behalf of non-governmental health care entities (Brigham, Ehrhardt, Nason, & Gessaroli, 2016). The health care industry has to account for the contributions that are received and those that they make. An entry made in the financial statements is the key issues that emerge from the health care and education reconciliation Act of 2010. It is combined with the protection and Affordable Care Act obtained from accountable care organizations (Anastasia, 2015). Under the health care industry, we have the electronic health records and accounting which is used for medical EHR incentives payments.
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For the health care companies, a challenge arises from the constant changes in regulation and reimbursement requirements. Nevertheless, a company can quickly adapt to the changing market if they grow a deeper understanding of their financial status (Karadag, 2015). With the use of financial ratios, a company can convert its financial information in a standardized manner (Anastasia, 2015). The process will allow the health care companies to make a comparison between them and their competitors and in the process, they will identify their strength and weaknesses.
References
Anastasia. (2015). Financial Statement Analysis: An Introduction. Retrieved from https://www.cleverism.com/financial-statement-analysis-introduction/
Brigham, E. F., Ehrhardt, M. C., Nason, R. R., & Gessaroli, J. (2016). Financial Management: Theory and Practice, Canadian Edition. Nelson Education.
Karadag, H. (2015). Financial management challenges in small and medium-sized enterprises: A strategic management approach. EMAJ: Emerging Markets Journal, 5(1), 26-40.
