Community Health Systems 2015 Annual Report Download - page 120

COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
applying enacted statutory tax rates applicable to future years to differences between the financial statement
carrying amounts and the tax bases of existing assets and liabilities. The effect on deferred taxes of a change in
tax rates is recognized in the consolidated statement of income during the period in which the tax rate change
becomes law.
Comprehensive Income (Loss). Comprehensive income (loss) is the change in equity of a business enterprise
during a period from transactions and other events and circumstances from non-owner sources.
Segment Reporting. A public company is required to report annual and interim financial and descriptive
information about its reportable operating segments. Operating segments, as defined, are components of an
enterprise about which separate financial information is available that is evaluated regularly by the chief
operating decision maker in deciding how to allocate resources and in assessing performance. Aggregation of
similar operating segments into a single reportable operating segment is permitted if the businesses have similar
economic characteristics and meet the criteria established by U.S. GAAP.
The Company operates in two distinct operating segments, represented by the hospital operations (which
includes the Company’s acute care hospitals and related healthcare entities that provide inpatient and outpatient
healthcare services) and the home care agencies operations (which provide in-home outpatient care). U.S. GAAP
requires (1) that financial information be disclosed for operating segments that meet a 10% quantitative threshold
of the consolidated totals of net revenue, profit or loss, or total assets; and (2) that the individual reportable
segments disclosed contribute at least 75% of total consolidated net revenue. Based on these measures, only the
hospital operations segment meets the criteria as a separate reportable segment. Financial information for the
home care agencies segment does not meet the quantitative thresholds and is therefore combined with corporate
into the all other reportable segment.
Derivative Instruments and Hedging Activities. The Company records derivative instruments on the
consolidated balance sheet as either an asset or liability measured at its fair value. Changes in a derivative’s fair
value are recorded each period in earnings or other comprehensive income (“OCI”), depending on whether the
derivative is designated and is effective as a hedged transaction, and on the type of hedge transaction. Changes in
the fair value of derivative instruments recorded to OCI are reclassified to earnings in the period affected by the
underlying hedged item. Any portion of the fair value of a derivative instrument determined to be ineffective
under the standard is recognized in current earnings.
The Company has entered into several interest rate swap agreements. See Note 8 for further discussion about
the swap transactions.
New Accounting Pronouncements. In May 2014, the Financial Accounting Standards Board (“FASB”) issued
Accounting Standards Update (“ASU”) 2014-09, which outlines a single comprehensive model for recognizing
revenue and supersedes most existing revenue recognition guidance, including guidance specific to the healthcare
industry. This ASU provides companies the option of applying a full or modified retrospective approach upon
adoption. This ASU is effective for fiscal years beginning after December 15, 2016. However, the FASB recently
issued a final ASU that defers the effective date by one year, with early adoption permitted for annual periods
beginning after December 15, 2016. The Company expects to adopt this ASU on January 1, 2018 and is currently
evaluating its plan for adoption and the impact on its revenue recognition policies, procedures and control
framework and the resulting impact on its consolidated financial position, results of operations and cash flows.
In April 2015, the FASB issued ASU 2015-03, which requires debt issuance costs related to a recognized debt
liability be presented in the balance sheet as a direct reduction from the carrying amount of that debt liability,
consistent with the accounting for debt discounts. The ASU did not change the measurement or recognition
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