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Healthcare Services Group May Have Recognized Uncollectible Revenue
Services firm appears to tighten its revenue recognition policy as bad receivables account for more than twenty percent of total.
May 3, 2023
Healthcare Services Group (HCSG), a provider of laundry, cleaning, dietary and maintenance services to nursing homes and hospitals, inserted new language in its latest quarterly report that signals a potentially more stringent revenue recognition policy. The new language— just fifteen words— implies the company may have previously recognized revenue it knew it might not collect in full.

Previously, Healthcare Services disclosed the amount of revenue recognized is based on the:

“...consideration to which the Company is entitled in exchange for providing the contracted goods and services.”

The new language suggests revenue will be now be recognized:

“...when it is probable that the Company will collect substantially all of such consideration.”

Notably, the company’s bad receivables allowance is 20.8% of total receivables as of March 31, 2023, unchanged from the prior year quarter.
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