Cornell University 2011-2012 Annual Report - DFA Home - Cornell ...

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(dollars in thousands)K. Sponsored AgreementsRevenues under grants, contracts, and similar agreements are recognized at the time expenditures are incurred. Theserevenues include the recovery of facilities and administrative costs, which are recognized according to negotiated predeterminedrates. Amounts received in advance in excess of incurred expenditures are recorded as deferred revenues.L. Medical Physician OrganizationThe Medical Physician Organization provides the management structure for the practice of medicine in an academic medicalcenter. In addition to conducting instructional and research activities, physician members generate clinical practiceincome from their professional services to patients. Also reflected as University revenues are Medical Physician Organizationfees. Expenses of the clinical practice, including physician compensation, administrative operations, and provision foruncollectible accounts, are reflected as University expenses. Net assets resulting from the activities of the Medical PhysicianOrganization are designated for the respective clinical departments of the Medical College.M. Use of EstimatesThe preparation of financial statements in conformity with U.S. generally accepted accounting principles requires managementto make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expensesduring the reporting period. Management’s assumptions are primarily related to the appropriate discount rate for thepurposes of fair-value calculations, to allowances for doubtful accounts, and to self-insured risks. Actual results may differfrom those estimates.N. Comparative Financial InformationThe consolidated statement of activities includes prior-year information in summary form, rather than by restriction class.Such information does not include sufficient detail to constitute a presentation of prior-year data in conformity with U.S.generally accepted accounting principles. Accordingly, such information should be read in conjunction with the University’sconsolidated financial statements for the prior fiscal year, from which the summarized information was derived.O. Accounting PronouncementsEffective for the fiscal year ending June 30, 2012, the University has modified disclosures required by ASU 2010-06: Improvementsto Disclosures about Fair Value Measurements. The modified disclosures are reflected in the tables that summarizeLevel 3 activity within Note 3 and Note 6. The tables now separately disclose sales, purchases and, when applicable,issuances and settlements.The University complied with the requirements of ASU 2010-24: Presentation of Insurance Claims and Related InsuranceRecoveries. The ASU requires that potential insurance recoveries are reflected as assets and the insurance claims as liabilities.The netting of the recoveries and estimated liabilities is no longer acceptable. For fiscal year ending June 30, 2012, theMedical College recorded a reinsurance receivable of $70.2 million and a reinsurance payable of $70.2 million.P. ReclassificationsCertain prior-year amounts have been reclassified to conform to the current-year presentation.Q. Income TaxesThe University is a not-for-profit organization as described in Section 501(c)(3) of the Internal Revenue Code and isgenerally exempt from income taxes on related income pursuant to the appropriate sections of the Internal Revenue Code.In accordance with the accounting standards, the University evaluates its income tax position each fiscal year to determinewhether it is more likely than not to be sustained if examined by the applicable taxing authority. This review had no materialimpact on the University’s consolidated financial statements.16