Cleveland Clinic Health System Obligated Group - FMSbonds.com

Cleveland Clinic Health SystemNotes to Consolidated Financial Statements (continued)3. Accounting Policies (continued)Investment income on investments, including changes in equity values of alternativeinvestments, is reported as nonoperating gains and losses except for earnings on funds held bybond trustees and assets held for self-insurance, which are included in other unrestrictedrevenues ($6.6 million and $11.8 million in 2007 and 2006, respectively). Donor restrictedinvestment income on temporarily and permanently restricted investments, including realizedand unrealized gains and losses, is included in temporarily restricted net assets. An unrealizedgain of $8.3 million at December 31, 2007 associated with the investment classified asnontrading is included in unrestricted net assets.Alternative investments also includes investments related to venture fund investments directlyowned by the System aggregating $4.4 million and $5.0 million at December 31, 2007 and 2006,respectively, which are recorded on the cost method. In 2007 and 2006, the System recorded aprovision for the impairment of certain venture fund investments of $0.6 million and $0.3million, respectively, which is included in nonoperating gains and losses.Financial InstrumentsThe carrying values of cash and cash equivalents, accounts receivable and accounts payable arereasonable estimates of fair value due to the short-term nature of these financial instruments. AtDecember 31, 2007 and 2006, the fair value of the System’s long-term debt, as estimated bydiscounted cash flow analyses using current borrowing rates for similar types of borrowingarrangements, was $1,482 million and $1,509 million (Note 11), respectively. Other noncurrentassets and liabilities have carrying values that approximate fair value.In September 2006, the Financial Accounting Standards Board (FASB) issued FASB Statementof Financial Accounting Standard (SFAS) No. 157, Fair Value Measurements (SFAS No. 157),which establishes a framework for using fair value to measure assets and liabilities, and expandsdisclosures about fair value measurements. SFAS No. 157 applies to other accountingpronouncements that require or permit fair value measurements and, accordingly, SFAS No. 157does not require any new fair value measurements. SFAS No. 157 is effective for financialstatements issued for fiscal years beginning after November 15, 2007, and interim periods withinthose fiscal years. The System is currently evaluating the potential impact that the adoption ofthis statement will have on its financial position and results of operations.13