Cleveland Clinic Health System Obligated Group - FMSbonds.com

Cleveland Clinic Health SystemNotes to Consolidated Financial Statements (continued)3. Accounting Policies (continued)GrantsGrant revenue is recognized in the period it is earned as the applicable project expenses areincurred and project milestones are achieved. Payments received in advance are deferred untilthe expenditure has been incurred and recorded as deferred revenue and included in other currentliabilities. The System recorded research grant revenue, included in other unrestricted revenues,of $168.3 million and $150.1 million in 2007 and 2006, respectively.Temporarily and Permanently Restricted Net AssetsTemporarily restricted net assets are used to differentiate resources, the use of which is restrictedby donors or grantors to a specific time period or purpose, from resources on which norestrictions have been placed or that arise from the general operations of the System. Temporarilyrestricted gifts and bequests are recorded as an addition to temporarily restricted net assets in theperiod received. Permanently restricted net assets consist of amounts held in perpetuity or forterms designated by donors, including the present value of expected future cash flows underseveral perpetual trusts for which the System is an income beneficiary or the beneficial interestin the fair value of underlying trust assets. Earnings on permanently restricted net assets arerecorded as investment income in temporarily restricted net assets and subsequently used inaccordance with the donor’s designation. Temporarily and permanently restricted net assets areprimarily restricted for research, education and strategic capital projects.The System returned $5.1 million in 2006 from temporarily restricted net assets to unrestrictednet assets that had been transferred in prior years for the purpose of maintaining donor restrictedfunds at the level required by donor stipulations.Excess of Revenues Over ExpensesThe consolidated statements of operations and changes in net assets include excess of revenuesover expenses. Changes in unrestricted net assets, which are excluded from excess of revenuesover expenses, consistent with industry practice, include unrealized gains and losses oninvestments classified as nontrading, amortization on the accumulative change in value of cashflow hedges previously recorded in unrestricted net assets in accordance with SFAS No. 133,Implementation Issue No. G26, pension liability adjustments, discontinued operations, foreigncurrency translation adjustments, contributions of long-lived assets (including assets acquiredusing grants or contributions which by donor restriction were to be used for the purpose ofacquiring such assets) and the cumulative effect of changes in accounting.15