Healthcare Fixed Assets & Depreciation Flashcards

Under Medicare cost reporting, which of the following is NOT classified as a capital-related cost?

Answer: Operating room supply costs

Operating room supplies are routine operating costs, not capital-related costs; CMS defines capital costs as depreciation, interest on capital debt, and lease costs for capital equipment.

A change in the estimated useful life of a depreciable healthcare asset is accounted for as:

Answer: A change in accounting estimate applied prospectively

Under ASC 250, a change in useful life is a change in accounting estimate and is applied prospectively to current and future periods without restating prior periods.

Which of the following items would NOT typically appear in a healthcare organization's fixed asset register?

Answer: Patient utilization statistics per procedure

Patient utilization statistics are clinical operational data and are not components of a fixed asset register, which tracks the physical and financial attributes of assets.

The 'half-year convention' in depreciation means that:

Answer: All assets acquired or disposed of during the year receive only a half-year of depreciation in that year

The half-year convention assumes all asset acquisitions and disposals occur at the mid-point of the year, so only half a year of depreciation is taken in the year of purchase or disposal.

A hospital performs a periodic physical inventory of its fixed assets primarily to:

Answer: Verify the asset register is accurate and identify ghost or missing assets

Physical asset inventories reconcile actual assets on hand to the register, identifying ghost assets (disposed but still on books) and unrecorded disposals.

When a healthcare organization renovates an existing building, which costs should be capitalized rather than expensed?

Answer: Costs that extend the useful life or significantly increase capacity

Betterments that extend useful life, increase capacity, or improve quality are capitalized; routine repairs and maintenance that merely keep the asset in working order are expensed.

Which of the following best describes the purpose of recording accumulated depreciation as a separate contra-asset rather than directly reducing the asset account?

Answer: It preserves the original cost information on the balance sheet while showing the portion consumed

Keeping accumulated depreciation separate allows financial statement users to see both original cost and the amount consumed to date, providing insight into asset age and replacement needs.