The CFO of a "Not-for-Profit" hospital is making a presentation at your college. The presentation is for Business and Health-Science majors. During the presentation the CFO mentions assets being reported "above the line." On the way out your roommate a health-science major asks, you, an accounting major, to explain what the CFO was referring to. What do you respond?
What will be an ideal response?
Not-for-Profit hospitals report an operating performance indicator in their statement of operations. This item reports the hospital's operating activities for the period and should include both operating income (loss) for the period and other income available for current operations. ASC 958 requires that net assets released from restrictions that are used in operations to be included in the performance indicator, thus, "above the line". This allows the reader of the financial statements to be able to identify assets that were previously restricted, held for specified purposes by the donor, that are now available for use in operations. Therefore, expenses incurred to achieve the entity's operations can be matched with the resources.
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