# ASC 470-954: Debt — Health Care Entities Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/470/954/) Study and research edition. Verify current requirements with the official source. Summaries, enrichment, and tags are machine-generated study aids. Paragraph html preserves source markup; snippet is abbreviated. Pending content is not necessarily effective. Tables and mathematical or amendment markup are retained as HTML where Markdown would lose structure. Source downloaded (UTC): 2026-09-10T00:34:33.725Z to 2026-09-10T00:34:48.558Z Record version: sha256:c34d2672c6d3ffe3ba62c261d18578e730d9797359fed991345913ca8e111514 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 470-954: Debt — Health Care Entities ### Machine-generated study aids ```json { "summary": "This Subtopic gives health care entity-specific debt guidance, principally for tax-exempt bond financings. Bonds issued by a financing authority for a health care entity's benefit are recorded as a liability (or lease liability) only if the entity is responsible for repayment; otherwise the proceeds are reported as contributions from the sponsoring entity. It also addresses arbitrage rebate liabilities owed to the U.S. Treasury and the accounting for crossover refundings.", "key_points": [ "Tax-exempt bonds issued by a financing authority for the benefit of a health care entity are reported as a liability on the entity's balance sheet if the entity is responsible for repayment, and that obligation may take the form of a lease liability (470-954-25-1).", "If the health care entity has no obligation to pay principal and interest (or related lease payments), no liability is recorded and the bond proceeds are reported as contributions from the sponsoring entity (470-954-25-1).", "IRS rules prohibit investment yield on tax-exempt debt proceeds from exceeding the interest rate on the debt; excess earnings create an arbitrage rebate liability payable to the U.S. Treasury to preserve tax-exempt status (470-954-25-2).", "The arbitrage determination is made as of the issue date, but intentional post-issuance acts can retroactively disqualify the issue, and the rebate can be substantial if proceeds are spent more slowly than planned (470-954-25-2).", "In a crossover refunding, the old bonds are not defeased until the crossover date, so no immediate gain or loss is recognized (470-954-40-1).", "If retirement dates of the old debt are established, the call premium, unamortized premium or discount, and initial issue costs are recognized systematically over the remaining life of the old debt as an adjustment of the cost of borrowing (470-954-40-1).", "The escrowed funds are reported as an asset and both old and new debts as liabilities, with no offsetting; income on the funds and interest expense on both debts are recognized in the income statement (470-954-40-1)." ], "categories": [ "Recognition", "Derecognition", "Presentation", "Industry-specific" ], "audience_level": "intermediate", "student_note": "The recurring exam trap is assuming that conduit tax-exempt bond proceeds always create a liability for the health care entity — recognition turns entirely on whether the entity is obligated to repay; if not, the proceeds are contribution revenue. Also remember that a crossover refunding produces no immediate gain or loss and requires gross (non-offset) presentation of the escrow asset and both debts.", "related_topics": [ "954-10", "470-50", "405-20", "958-605", "842", "210-20" ], "key_concepts": [ "tax-exempt bond financing", "arbitrage rebate liability", "crossover refunding", "advance refunding", "conduit debt obligation", "defeasance", "contributions from sponsoring entity", "offsetting of assets and liabilities" ] } ``` Source downloaded (UTC): 2026-09-10T00:34:33.725Z to 2026-09-10T00:34:33.725Z Record version: sha256:7e043c7bdbd2c3ad89f37ef354eb6ea679f7ed2820dff53be2c675e8d41608ea Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 470-954-00: 00 Status [Read section](https://asc.understandingaccounting.org/asc/470/954/#00-status) SEC content: no ##### [470-954-00-1](https://asc.understandingaccounting.org/asc/470/954/#470-954-00-1) Pending content: no Source downloaded (UTC): 2026-09-10T00:34:33.725Z to 2026-09-10T00:34:33.725Z Record version: sha256:87dbb8599de5930bf2c54f28ab3be27291047ef13eef7aec51e8527b67eef453 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following table identifies the changes made to this Subtopic.
ParagraphActionAccounting Standards UpdateDate
Advance RefundingAddedAccounting Standards Update No. 2016-0202/25/2016
Conditional ContributionAddedAccounting Standards Update No. 2018-0806/21/2018
ContributionAmendedAccounting Standards Update No. 2018-0806/21/2018
ContributionAmendedAccounting Standards Update No. 2010-0701/28/2010
Donor-Imposed ConditionAddedAccounting Standards Update No. 2018-0806/21/2018
Promise to GiveAddedAccounting Standards Update No. 2018-0806/21/2018
954-470-25-1AmendedAccounting Standards Update No. 2016-0202/25/2016
954-470-40-1AmendedAccounting Standards Update No. 2016-0202/25/2016
Source downloaded (UTC): 2026-09-10T00:34:36.180Z to 2026-09-10T00:34:36.180Z Record version: sha256:1d8fe6f360ce24254c86c5c09af3275a1f6b7370c1fdb82240942511b71b3980 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 470-954-05: 05 Overview and Background [Read section](https://asc.understandingaccounting.org/asc/470/954/#05-overview-and-background) SEC content: no ##### [470-954-05-1](https://asc.understandingaccounting.org/asc/470/954/#470-954-05-1) Pending content: no Source downloaded (UTC): 2026-09-10T00:34:36.180Z to 2026-09-10T00:34:36.180Z Record version: sha256:9e632d9d340f30ac2cea56d372d56de25078e3253354570620750461f3d4c636 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic provides guidance on accounting for debt for health care entities within the scope of this Topic. Source downloaded (UTC): 2026-09-10T00:34:38.857Z to 2026-09-10T00:34:38.857Z Record version: sha256:8016e056fdd6985e4dc6726b249822a36be7fd2626cf9a01c7f85938b9368663 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 470-954-15: 15 Scope and Scope Exceptions [Read section](https://asc.understandingaccounting.org/asc/470/954/#15-scope-and-scope-exceptions) SEC content: no #### Overall Guidance ##### [470-954-15-1](https://asc.understandingaccounting.org/asc/470/954/#470-954-15-1) Pending content: no Source downloaded (UTC): 2026-09-10T00:34:38.857Z to 2026-09-10T00:34:38.857Z Record version: sha256:7a7ac20fe05f85d0c52000ab84651509e66797f5c94728372e50d14239d0d202 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic follows the same Scope and Scope Exceptions as outlined in the Overall Subtopic, see Section 954-10-15. Source downloaded (UTC): 2026-09-10T00:34:45.263Z to 2026-09-10T00:34:45.263Z Record version: sha256:b846d4f7590d0066447801ca4a2b2cf33c882d12ba8b80791f161f3f5b3d042c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 470-954-25: 25 Recognition [Read section](https://asc.understandingaccounting.org/asc/470/954/#25-recognition) SEC content: no #### Financing Authorities ##### [470-954-25-1](https://asc.understandingaccounting.org/asc/470/954/#470-954-25-1) Pending content: no Source downloaded (UTC): 2026-09-10T00:34:45.263Z to 2026-09-10T00:34:45.263Z Record version: sha256:10f5f806c32164b2f76f9b95d0dbb345568add33c1bac3fd261f3a129eb3ded9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. When a financing authority issues tax-exempt bonds or similar debt instruments and uses the proceeds for the benefit of a health care entity, the obligation shall be reported as a liability in the entity's balance sheet if the health care entity is responsible for repayment. In some cases, this obligation may take the form of a liability arising from a lease. If a health care entity has no obligation to make payments of principal and interest on the debt or lease payments on related buildings or equipment, the entity shall not reflect the liability on its balance sheet. In such circumstances, proceeds from the bond issue shall be reported as [contributions](https://asc.understandingaccounting.org/glossary/c/#contribution "An unconditional transfer of cash or other assets, as well as unconditional promises to give, to an entity or a reduction, settlement, or cancellation of its liabilities in a voluntary nonreciprocal transfer by another entity acting other than as an owner. Those characteristics distinguish contributions from:Exchange transactions, which are reciprocal transfers in which each party receives and sacrifices approximately commensurate valueInvestments by owners and distributions to owners, which are nonreciprocal transfers between an entity and its ownersOther nonreciprocal transfers, such as impositions of taxes or legal judgments, fines, and thefts, which are not voluntary transfers. In a contribution transaction, the resource provider often receives value indirectly by providing a societal benefit although that benefit is not considered to be of commensurate value. In an exchange transaction, the potential public benefits are secondary to the potential direct benefits to the resource provider. The term contribution revenue is used to apply to transactions that are part of the entity's ongoing major or central activities (revenues), or are peripheral or incidental to the entity (gains). See also Inherent Contribution and Conditional Contribution.") from the sponsoring entity. #### Arbitrage Rebate Liabilities ##### [470-954-25-2](https://asc.understandingaccounting.org/asc/470/954/#470-954-25-2) Pending content: no Source downloaded (UTC): 2026-09-10T00:34:45.263Z to 2026-09-10T00:34:45.263Z Record version: sha256:365afd8d37240b85d80d23beee96de580cc46522c6ba6c2ea94b2fa11ad40aca Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Internal Revenue Service (IRS) regulations concerning tax-exempt debt prohibit the yield realized from the investment of the proceeds of such debt from exceeding the interest rate to be paid on such debt. Whenever a provider invests tax-exempt bond proceeds and the ultimate yield is higher than the interest rate on the bonds, the provider may be subject to an arbitrage rebate liability. The arbitrage determination is made as of the date of the issue; however, intentional acts undertaken after the date of the issue can disqualify the issue retroactively. The earnings in excess of interest expense represent a liability that must be paid to the U.S. Treasury in order for the bonds to maintain their tax-exempt status. The arbitrage rebate liability may be a substantial amount if the bond proceeds are not spent as quickly as planned. For example, this may occur if a provider encounters a delay in a major construction project. Source downloaded (UTC): 2026-09-10T00:34:48.558Z to 2026-09-10T00:34:48.558Z Record version: sha256:16289a8b1738cf72c2e62c73236fb11cd9437b57f53194502b10e017c5a78818 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 470-954-40: 40 Derecognition [Read section](https://asc.understandingaccounting.org/asc/470/954/#40-derecognition) SEC content: no ##### [470-954-40-1](https://asc.understandingaccounting.org/asc/470/954/#470-954-40-1) Pending content: no Source downloaded (UTC): 2026-09-10T00:34:48.558Z to 2026-09-10T00:34:48.558Z Record version: sha256:0e457752bd5d6d722c9e954f0426f63bba9162f7d6017c8984a195cbd9967de1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In a crossover refunding, because the old bonds are not defeased until the crossover date, no immediate gain or loss shall be recognized. If the retirement dates of the old debt have been established, the call premium, unamortized premium or discount, and initial issue costs shall be recognized systematically in the income statement over the remaining life of the old debt as an adjustment of the cost of borrowing related to the old debt. In addition, the income earned on the funds used to consummate the [advance refunding](https://asc.understandingaccounting.org/glossary/a/#advance-refunding "A transaction involving the issuance of new debt to replace existing debt with the proceeds from the new debt placed in trust or otherwise restricted to retire the existing debt at a determinable future date or dates.") and the interest expense on both the old and new debts shall be recognized in the income statement. The funds used to consummate the advance refunding shall be reported as an asset and both the old and new debts shall be reported as liabilities. The assets and liabilities shall not be offset.