Adopting the New FASB Standards in Healthcare
Due to the sheer amount of equipment and real estate used in the delivery of care, healthcare is significantly affected by the new FASB/IASB standards. Whether managed in a centralized location or decentralized, each department is required to aggregate, capture and report lease data on each equipment lease to be compliant with the new regulations.
With these new accounting standards, medical equipment leases that had been off the balance sheet – such as CT scanners, MRI machines, and hospital beds – must be recorded as assets. While service contracts (also known as embedded leases) – for diagnostic equipment for instance – are now liabilities on the balance sheet.
It’s necessary to audit and evaluate medical equipment and devices with a lease term of more than 12 months to determine their classification and ensure financial compliance. The new standards also draw a higher level of scrutiny to real estate leases, which require a higher level of reporting and affect the many off-site, outpatient locations used as part of clinical operations.
Which Lease Types Will Be Affected?
Any lease more than 12 months that covers the following assets:
- Real estate leases of outpatient facilities
- Medical equipment (e.g., MRI machines)
- Embedded leases in diagnostic equipment
- Ground and air leases on hospital campuses
With the new standards, a healthcare entity’s next steps are crucial to successful compliance. Organizations should perform a general assessment to determine the locations of the leases, and then form a cross-functional team to aid in the collection of all leases and their respective data. The team should consist of members who are knowledgeable about the locations of leases – which in a decentralized environment may be a complex process – as well as those who are skilled at interpreting lease language.
Accruent is dedicated to helping your healthcare organization find compliance with the new standards. Our Lease Lucernex solution is designed to streamline business operations by providing a single location for equipment lease management. By gaining visibility into the entire portfolio, your team attains the capacity to make qualified financial decisions, mitigating the risk of manually reporting from various departments across your healthcare system.