Generally Accepted Accounting Principles Relating to Health Care

Basic financial statements are valuable documents in the management of health care organizations. Financial statements are helpful in the management of health care organizations and determination of their credit worthiness. Investors and other stakeholders also find the statements highly beneficial in determining the appropriateness for investment in the health care organization. Accepted accounting principles are conventions set to regulate formalized systems of accounting; especially applied in America. Set by the financial accounting and standards board, accepted accounting principles guide the preparation of basic financial statements in all organizations (Riahi-Belkaoui, 2004). The basic financial statements include the balance sheet, cash flow statement, statement of changes in the organization's assets and statements of operations. Health care organizations must adhere to generally accepted accounting principles that are relevant to their operations. Different accepted accounting principles are applicable to the management of health care organizations and preparation of financial documents. Since most health care organizations must conform to the auditing standards by CPA, they must use the various accepted accounting principles.

In 1973 the Financial Accounting Standards Board (FASB) was established to set the financial accounting standards in the United States of America for nongovernmental entities. These standards are collectively called U.S. Generally accepted Accounting Principles, or U.S. GAAP. The Securities and Exchange Commission (SEC) and the American Institute of Certified Public Accountants acknowledge the authority of these standards (FASB, n.d). A “proven, independent due process” is used to collect the viewpoints of the financial statements prepares and users for the constant improvement of these standards. An Accounting Status Update(ASU) is not an authoritative source however documents the amendments to communicate the changes in the FASB Codification for a user to understand the reason and future of those changes (FASB, n.d).

This research project will inform the reader of the difference between the United States accounting standards and International accounting standards. The United States uses the Financial Accounting Standards Board (FASB) to issue financial reporting procedures. The International Financial Reporting Standards (IFRS) are issued by the International Accounting Standards Board (IASB). There are proposals for the United States to adopt the International standards. Financial reporting procedures are debated about the United States using the Generally Accepted Accounting Procedures (GAAP) or following the global procedures. This

The documents that comprise GAAP vary in format, completeness, and structure. As a result, financial statement preparers sometimes are not sure whether they have the right GAAP; determining what is authoritative and what is not becomes difficult. In response to these concerns, the FASB developed the Financial Accounting Standards Board Accounting Standards Codification. The FASB’s primary goal in developing the Codification is to provide in one place all the authoritative literature related to a particular topic. Professional accountants pay for access to the FASB. The OU Accounting Department has paid for academic access to the FASB Codification. Our Login information is:

GAAP stands for Generally Accepted Accounting Principles. This is a key component to know in any business. GAAP is based on established concepts, objectives, standards and conventions to guide how financial statements are prepared and presented. GAAP’s objective is to provide information that is useful to investors, lenders, or others that provide resources to a company or not-for-profit organization. GAAP includes principles on a few things. One is recognition. Recognition is defined as what items are to be listed on the financial statements. This includes assets, liabilities, revenues and expenses. The next is measurement. This refers to the amounts that need to be reports of each part of the financial statement. Another is presentation. This refers to what is displayed and listed on the statement and how they are organized. And lastly there is disclosure. This includes the specific information that is the most important to the people that utilize the financial

These four elements that directs compliance are to follow all the rules and regulations essentially set by general accepted accounting principles. Similarly, the ethics is set by the organization for their personnel, including their policies on ethics and the standard course of action. Next, the two elements included are fraud and abuse which everyone should know when it comes to being honest and doing only what is ethically correct to all the parties directly involved. By using these general accepted accounting principles, the organization would be successful and surely compliant. Using these guidelines that comes from the accepted accounting principles, together with the organization's ethical policies and organizational procedures, they could prevent the fraud or abuse from happening ever within the organization. These guidelines that exists for organizations' benefit and so that they are prepared at all times whenever they are requested to show their documentation to outside vendors.

The Morley (2012) website states that generally accepted accounting principles are standards that determine how accountants in the U.S. “Conduct and format their reports are determined by the FASB, U.S. Accounting records must be seen by a number of people outside of the organization for transparency purposes” (Morley, 2012). The Morley (2012) website states that if each company created its own accounting reporting methods, comparing financial statements would be inefficient and hiding information would be easier. According to the FASB, entities such as the U.S. Securities Exchange Commission and the American Institute of Certified Public Accountants recognize FASB's authority to set standards. This law ensures that no money is pocketed without being taxed and that all revenues are reported. As far as general financial ethical standards, “financial professionals have obligations to be competent, accountants and financial professionals must not only have secured education and practice that prepares them for their positions, but they must also continue that education by learning new information that can affect their practices” (Morley, 2012). According to “Associations For Financial Professionals” (2012), “financial professionals have an obligation to their

uses the Generally Accepted Accounting Principles as a regulatory requirement for managing financial resources. These are the guidelines and practices that are accepted in the field of accounting internationally in standardizing financial documents such as balance sheets, cash flow statements and income statements. The organization follows these principles in reporting its financial information. The absence of these standards would give the organization staff the privileges in divulging financial information at their individual expense and not at the company’s thus affecting its overall credibility to investors and

There are two sets of accounting standards that are used worldwide. One is the International Financial Reporting Standards (IFRS) and the U.S. Generally Accepted Accounting Principles (GAAP). There is a huge desire for there to one set of accounting standards worldwide with the increase of companies performing business in many different countries and global expansion.

There are no formal accounting principles that apply to health care. However, there are five generally accepted guiding principles used in the management of the financial aspects of health care management (Cleverly, Song & Cleverly, 2011). Understanding the five guiding principles are important in understanding financial information and managerial accounting and how the principles relate to health care (Cleverly et. al.). The five principles include, accounting entity, money measurement, duality, cost valuation, and stable monetary unit. Each principle and how it relates to health care is

GAAP (Generally Accepted Accounting Principles) determine the content and format of financial statements. SEC (Securities and Exchange Commission) requires publicly traded companies to issue annual audit. Concerns are about adequacy of disclosure; and behavioral implications are secondary.

This week chapter 1 focused on introducing financial management in healthcare organizations. Financial management provides accounting and finance information to assist managers in making decisions to accomplish the organization goals. Accounting is divided into two sections: financial and managerial. Financial accounting is to provide information to external users, such as the government, lenders, insurers etc. Managerial accounting is to provide information to internal users, such as managers. Both accounting methods are very important to healthcare organizations, as they are both needed. The chapter also discusses the six major objectives of healthcare financial management, quality assessments, and ethical theories.

GAAP is exceptionally useful because it attempts to regulate and normalize accounting definitions, assumptions, and methods. Because of generally accepted accounting principles one is able to presuppose that there is uniformity from year to year in the methods that are used to prepare a

The US Generally Accepted Accounting Principles (GAAP) is a set of international accounting rules which originated from the United States. US GAAP can be defined as a set of accounting principles, standards and procedures that companies use to compile their financial statements (Elliott & Elliott, 2008). The International Financial Reporting Standards (IFRS) on the other hand are accounting rules originating from the United Kingdom. International Financial Reporting Standards (IFRS) are a set of accounting rules designed with a common global language for business affairs so that financial accounts of companies are understandable and comparable across international boundaries (Devinney, Pedersen & Tihanyi, 2010).

The board acknowledges the diverse nature of regulatory framework in developing concrete and uniform standards. These standards help in proposing and clarifying a complete guidance as well as demonstrating the understanding of complex issues in accounting. Moreover, help in demonstrating advanced knowledge in the application of accounting standards in the preparation and analysis of financial statements.