Changes Made to Accounting Standards for Refundable CCRC Entrance Fees

The Financial Accounting Standards Board decided during its May 30 meeting to finalize some amendments changing the way continuing care retirement communities (CCRCs) account for refundable entrance fees.

The amendments will be included in a separate Accounting Standards Update in July 2012, and they could affect certain communities depending on their entrance fee refund policies. 

“CCRCs that do not have language in their contract that specifically limits refunds to the reoccupancy proceeds of the specific unit, will have a cumulative effect adjustment—which is a change in accounting principle,” says Cline Comer, a health care partner with accounting firm CliftonLarsonAllen. “This will restore the liability to the full refundable amount under the contract, with a corresponding reduction of net assets.”

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Affected communities will need to figure out how much they’ll be impacted by this accounting change, says CliftonLarsonAllen, and they might need to devise a plan to communicate with their residents and consumers as some may no longer recognize an “amortization income.” This could result in operating losses in financials, says the firm. 

Read more at CliftonLarsonAllen.

Written by Alyssa Gerace

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