Mobile Health (mHealth) Accounting

Mobile Health (mHealth) Accounting: Financial Reporting for Mobile Applications and

Wearable Devices in Healthcare

Introduction

The field of mobile health, also known as mHealth, has seen tremendous growth in recent

years with the rise of smartphones and other mobile devices. mHealth uses mobile and

wireless technologies like mobile devices, wearable devices, wireless networks to deliver

health information and services. As the use of mHealth applications and wearable devices

grows, so too does the need for financial reporting and accounting standards specific to this

industry. This paper will explore some of the key financial reporting and accounting

There are a few different revenue streams to consider:

- Upfront Application/Device Sales: For mHealth apps or devices sold as a one-time

purchase, revenue would generally be recognized upon delivery or download of the product

to the customer. This follows the core revenue recognition principle of recognizing revenue

when control of the good or service is transferred to the customer.

- Subscription Services: Many mHealth apps and devices rely on ongoing subscription plans

where customers pay a recurring fee (monthly, annually, etc.) for ongoing access to app

features, service/technical support, cloud data storage, and software updates. For

subscription services, revenue should be recognized ratably over the subscription period as

the customer simultaneously receives and consumes the benefits.

customization work or configuration services to integrate with a provider’s existing systems,

revenue may need to be recognized over time based on the completion of project milestones

or percentage of services provided.

- Data Monetization: As wearable devices and health apps collect more personal data on

users, some companies are exploring ways to monetize aggregate and anonymized user

data. However, accounting standards have not fully caught up with data monetization

models yet, so revenue recognition policies may need to consider the nature and timing of

benefits transferred to the customer.

In general, mHealth companies need to carefully evaluate the various revenue streams from

their business model and apply the appropriate revenue recognition treatment that aligns

with accounting standards. Proper revenue recognition is important for financial reporting

credibility and compliance.

Accounting for Research and Development Costs

Another major accounting area is the treatment of research and development (R&D) costs.

For mHealth companies, a significant portion of expenses may be spent on developing new

app features and technologies, as well as updating existing products. Under accounting

principles, R&D costs must be expensed as incurred rather than capitalized, with a few

exceptions:

model is complete.

they are clearly related to a specific project and generate identifiable assets with probable

future economic benefits, in which case they can be included in the capitalized amount.

Properly distinguishing R&D costs from other capitalizable costs is important for financial

amounts. It also impacts metrics such as operating margins and return on assets that are

important for investors. Companies need to establish clear accounting policies around

capitalization thresholds.

Developing Appropriate Cost Structures

support and other post-sale customer services. May be included in COGS or operating

expenses depending on nature.

delivering digital products and services. Treated as operating expenses.

- Software Development Costs - Payroll, contractor fees, licenses, etc. for developing and

updating apps/devices. Treated as R&D expenses or capitalized assets depending on

nature.

- Marketing & Selling Expenses - Payroll, ads, commissions, trade shows for sales &

marketing activities. Operating expenses.

Proper classification and allocation of costs is required under accounting principles and

performance analysis against industry peers.

Tax Implications of mHealth

There are also tax implications specific to the mHealth industry that companies need to be

aware of:

penalties and back taxes owed. The mobile, remote nature of mHealth work needs careful

review under various employment laws.

- R&D Tax Credits - Governments offer tax incentives to encourage innovation. mHealth

local levels.

- Capitalization of Intangible Assets - For tax purposes, certain R&D and acquisition costs

may be eligible for capitalization as intangible assets and amortized over 15 years under

Section 174 and Section 197, respectively, to reduce current tax expenses.

- Segment Reporting - Digital health operations may involve distinct business units providing

varying products/services requiring segment disclosures.

- Key Performance Indicators - Important non-GAAP metrics like monthly/daily active users,

customer retention rates, churn, should be defined consistently and disclosed along with

required GAAP measures.

- Sensitivity Analysis - The rapidly evolving digital health industry is prone to disruption.

Analytics on impact of technology changes, competitor actions needs to be provided.

- Revenue Concentration - Over-reliance on few customers increases risk. Disclosure on %

of revenues from major customers assures investors of diversification.

discussion on identification, valuation and impairment review of intangibles on the balance

sheet.

- Liquidity and Capital Resources - Startups require focused analysis to assure adequate

funding available to meet obligations and execute growth strategy for next 12 months.

custody of assets to prevent errors and fraud.

- Access Controls - Restricting system access through layered authentication and

authorization for different user types.

- Data Integrity Checks - Implementing validation controls to ensure accuracy and

completeness of key datasets like user profiles, transactions.

- Change Management - Formal processes to track, test and approve deployment of product

updates impacting financial results.

offline data redundancy to minimize financial disruptions.

- Vendor Management - Third party risks necessitate controls over selection of strategic

Implementing and testing of these foundational controls provide assurance over financial

information and reduce compliance violations in the dynamic mHealth domain.

Career Prospects in mHealth Accounting

As mobile health continues its rapid adoption worldwide, job opportunities are growing

significantly for accounting and finance professionals with expertise in this emerging sector.

Some potential career paths include:

strategic guidance for digital health ventures.

- Digital Health Auditor - Evaluate internal controls, audit financials of mHealth firms for SOX,

IPO readiness with a public accounting firm.

- Corporate Finance Manager - Lead financial planning, reporting, analysis functions for

financial lens at venture capital, private equity firms.

filings and audits leveraging technology incentives.

- Financial Systems Consultant - Implement ERP, billing solutions tailored for unique needs

of mHealth like subscription-based models.

Accounting skills combined with specialized knowledge of healthcare technologies deliver

high career impact. Pursuing relevant certifications like CPA, CMA enhances professional

qualifications for the digital health finance domain.

Conclusion

technology and healthcare finance.

The field of mobile health, also known as mHealth, has seen tremendous growth in recent

wireless technologies like mobile devices, wearable devices, wireless networks to deliver

health information and services. As the use of mHealth applications and wearable devices

grows, so too does the need for financial reporting and accounting standards specific to this

industry. This paper will explore some of the key financial reporting and accounting

considerations for mHealth applications and wearable devices, including revenue

recognition, developing cost structures, research and development expenses, and tax

implications.

Revenue Recognition for mHealth Apps and Devices

recognize revenue from the sale and use of mobile applications and wearable devices.

There are a few different revenue streams to consider:

- Upfront Application/Device Sales: For mHealth apps or devices sold as a one-time

purchase, revenue would generally be recognized upon delivery or download of the product

to the customer. This follows the core revenue recognition principle of recognizing revenue

where customers pay a recurring fee (monthly, annually, etc.) for ongoing access to app

revenue, the general principle is to recognize it when an ad impression is delivered.

However, with performance-based ads where payment is dependent on user engagement

(e.g. click-through), revenue recognition may need to wait until the user performs the desired

action.

- Customization/Configuration Services: For mHealth solutions that involve significant

customization work or configuration services to integrate with a provider’s existing systems,

revenue may need to be recognized over time based on the completion of project milestones

or percentage of services provided.

with accounting standards. Proper revenue recognition is important for financial reporting

credibility and compliance.

Another major accounting area is the treatment of research and development (R&D) costs.

For mHealth companies, a significant portion of expenses may be spent on developing new

app features and technologies, as well as updating existing products. Under accounting

principles, R&D costs must be expensed as incurred rather than capitalized, with a few

exceptions:

- Costs incurred after technological feasibility has been established should be capitalized as

an intangible asset. Technological feasibility for software is typically reached when a working

model is complete.

probable future economic benefits can be capitalized.

- Internal R&D costs such as employee compensation should generally be expensed, unless

they are clearly related to a specific project and generate identifiable assets with probable

future economic benefits, in which case they can be included in the capitalized amount.

important for investors. Companies need to establish clear accounting policies around

Another accounting consideration is to properly categorize costs into the appropriate buckets

the major cost categories may include:

- Cost of Goods Sold (COGS) - Direct materials, labor, freight costs associated with

producing apps, devices and related products/services.

- Fulfillment Costs - Expenses related to order processing, shipping/handling, customer

support and other post-sale customer services. May be included in COGS or operating

expenses depending on nature.

- Infrastructure Costs - Server hosting, bandwidth, payment processing fees required for

Proper classification and allocation of costs is required under accounting principles and

provides transparency into a company’s finances. It also enables benchmarking and

Tax Implications of mHealth

There are also tax implications specific to the mHealth industry that companies need to be

aware of:

- Geographical Nexus - Digital businesses need to carefully evaluate tax nexus creation

based on location of employees, servers, customers to determine economic presence

creating income/sales tax filing obligations in different jurisdictions.

Companies need clear understanding of which digital products and services may trigger

sales/VAT taxation based on local laws.

- Employee vs. Contractor Classification - Incorrect worker classification can lead to

penalties and back taxes owed. The mobile, remote nature of mHealth work needs careful

review under various employment laws.

local levels.

Section 174 and Section 197, respectively, to reduce current tax expenses.

Proper tax planning and compliance is essential given the complex multi-jurisdictional nature

of digital businesses. mHealth companies need knowledgeable tax and accounting

specialists.

There are also financial reporting and disclosure requirements specific to publicly traded

mHealth companies or those seeking external funding. Some considerations include:

- Segment Reporting - Digital health operations may involve distinct business units providing

varying products/services requiring segment disclosures.

- Revenue Concentration - Over-reliance on few customers increases risk. Disclosure on %

of revenues from major customers assures investors of diversification.

discussion on identification, valuation and impairment review of intangibles on the balance

sheet.

- Liquidity and Capital Resources - Startups require focused analysis to assure adequate

funding available to meet obligations and execute growth strategy for next 12 months.

Robust financial reporting and disclosures help stakeholders properly evaluate a company’s

financial position, performance, risks and future outlook in this new and changing sector.

Standard setters may need to provide additional guidance for unique mHealth companies.

Given the technical complexity and risks in digital health operations, strong internal controls

are paramount over financial reporting in mHealth companies. Key considerations include:

- Segregation of Duties - Proper separation of responsibilities over records, transactions,

custody of assets to prevent errors and fraud.

- Data Integrity Checks - Implementing validation controls to ensure accuracy and

updates impacting financial results.

- Inventory Management - Robust governance needed for tracking digital inventories like app

licenses, subscription plans to maintain integrity of deferred revenue balances.

- Cybersecurity - Protecting financial data through endpoint protection, network security

- Disaster Recovery - Ensuring business continuity through tested backup infrastructure,

offline data redundancy to minimize financial disruptions.

- Vendor Management - Third party risks necessitate controls over selection of strategic

Some potential career paths include:

- mHealth Startup CFO/Controller - Oversee all financial operations, fundraising and

- Digital Health Auditor - Evaluate internal controls, audit financials of mHealth firms for SOX,

IPO readiness with a public accounting firm.

- Corporate Finance Manager - Lead financial planning, reporting, analysis functions for

mHealth division/products at healthcare providers or insurers.

(e.g. click-through), revenue recognition may need to wait until the user performs the desired

action.

- Customization/Configuration Services: For mHealth solutions that involve significant

revenue may need to be recognized over time based on the completion of project milestones

or percentage of services provided.

- Data Monetization: As wearable devices and health apps collect more personal data on

users, some companies are exploring ways to monetize aggregate and anonymized user

data. However, accounting standards have not fully caught up with data monetization

In general, mHealth companies need to carefully evaluate the various revenue streams from

Another major accounting area is the treatment of research and development (R&D) costs.

For mHealth companies, a significant portion of expenses may be spent on developing new

app features and technologies, as well as updating existing products. Under accounting

principles, R&D costs must be expensed as incurred rather than capitalized, with a few

- Costs incurred after technological feasibility has been established should be capitalized as

an intangible asset. Technological feasibility for software is typically reached when a working

model is complete.

reporting and compliance with standards like ASC 730 for separately reporting R&D expense

amounts. It also impacts metrics such as operating margins and return on assets that are

important for investors. Companies need to establish clear accounting policies around

Developing Appropriate Cost Structures

Another accounting consideration is to properly categorize costs into the appropriate buckets

of costs of goods sold (COGS), operating expenses, assets, etc. For mHealth companies,

the major cost categories may include:

- Cost of Goods Sold (COGS) - Direct materials, labor, freight costs associated with

producing apps, devices and related products/services.

- Fulfillment Costs - Expenses related to order processing, shipping/handling, customer

expenses depending on nature.

- Infrastructure Costs - Server hosting, bandwidth, payment processing fees required for

delivering digital products and services. Treated as operating expenses.

- Software Development Costs - Payroll, contractor fees, licenses, etc. for developing and

- Marketing & Selling Expenses - Payroll, ads, commissions, trade shows for sales &

provides transparency into a company’s finances. It also enables benchmarking and

Tax Implications of mHealth

There are also tax implications specific to the mHealth industry that companies need to be

aware of:

- Geographical Nexus - Digital businesses need to carefully evaluate tax nexus creation

based on location of employees, servers, customers to determine economic presence

creating income/sales tax filing obligations in different jurisdictions.

- Digital Goods Taxation - Many states/countries seek to tax digital goods and services.

companies should evaluate eligibility for and utilize available R&D tax credits at federal and

local levels.

may be eligible for capitalization as intangible assets and amortized over 15 years under

Section 174 and Section 197, respectively, to reduce current tax expenses.

Proper tax planning and compliance is essential given the complex multi-jurisdictional nature

of digital businesses. mHealth companies need knowledgeable tax and accounting

specialists.

Financial Reporting Considerations

There are also financial reporting and disclosure requirements specific to publicly traded

mHealth companies or those seeking external funding. Some considerations include:

- Segment Reporting - Digital health operations may involve distinct business units providing

varying products/services requiring segment disclosures.

- Key Performance Indicators - Important non-GAAP metrics like monthly/daily active users,

customer retention rates, churn, should be defined consistently and disclosed along with

required GAAP measures.

- Intangible Assets - Growing importance of brands, IP, customer data warrants expanded

sheet.

- Liquidity and Capital Resources - Startups require focused analysis to assure adequate

funding available to meet obligations and execute growth strategy for next 12 months.

Robust financial reporting and disclosures help stakeholders properly evaluate a company’s

financial position, performance, risks and future outlook in this new and changing sector.

Standard setters may need to provide additional guidance for unique mHealth companies.

Internal Controls in mHealth Accounting

- Data Integrity Checks - Implementing validation controls to ensure accuracy and

completeness of key datasets like user profiles, transactions.

- Change Management - Formal processes to track, test and approve deployment of product

updates impacting financial results.

- Inventory Management - Robust governance needed for tracking digital inventories like app

licenses, subscription plans to maintain integrity of deferred revenue balances.

- Cybersecurity - Protecting financial data through endpoint protection, network security

controls and monitoring threats against systems.

- Disaster Recovery - Ensuring business continuity through tested backup infrastructure,

- Vendor Management - Third party risks necessitate controls over selection of strategic

partners processing sensitive info.

Implementing and testing of these foundational controls provide assurance over financial

information and reduce compliance violations in the dynamic mHealth domain.

significantly for accounting and finance professionals with expertise in this emerging sector.

strategic guidance for digital health ventures.

- Digital Health Auditor - Evaluate internal controls, audit financials of mHealth firms for SOX,

IPO readiness with a public accounting firm.

- Corporate Finance Manager - Lead financial planning, reporting, analysis functions for

- FinTech Analyst - Evaluate new healthcare technology investments, m&a deals from a

financial lens at venture capital, private equity firms.

- Compliance Accountant - Monitor ongoing compliance of mHealth applications, services,

Accounting skills combined with specialized knowledge of healthcare technologies deliver

high career impact. Pursuing relevant certifications like CPA, CMA enhances professional

qualifications for the digital health finance domain.

Conclusion

In summary, the emerging field of mobile health is disrupting traditional healthcare delivery

and unlocking new opportunities for financial professionals to play important roles. While

core accounting and reporting principles still apply, mHealth introduces novel considerations

around revenue streams, cost structures, intellectual property, and multi-jurisdictional

compliance that require adapted frameworks. Robust internal controls and governance are

equally critical given technical and security risks. As digital transformation of healthcare

accelerates, understanding financial implications will be paramount for stakeholders across

the ecosystem. Overall, mHealth presents exciting prospects at the intersection of

technology and healthcare finance.

The field of mobile health, also known as mHealth, has seen tremendous growth in recent

years with the rise of smartphones and other mobile devices. mHealth uses mobile and

wireless technologies like mobile devices, wearable devices, wireless networks to deliver

health information and services. As the use of mHealth applications and wearable devices

grows, so too does the need for financial reporting and accounting standards specific to this

industry. This paper will explore some of the key financial reporting and accounting

There are a few different revenue streams to consider:

- Upfront Application/Device Sales: For mHealth apps or devices sold as a one-time

purchase, revenue would generally be recognized upon delivery or download of the product

to the customer. This follows the core revenue recognition principle of recognizing revenue

when control of the good or service is transferred to the customer.

- Subscription Services: Many mHealth apps and devices rely on ongoing subscription plans

where customers pay a recurring fee (monthly, annually, etc.) for ongoing access to app

features, service/technical support, cloud data storage, and software updates. For

subscription services, revenue should be recognized ratably over the subscription period as

the customer simultaneously receives and consumes the benefits.

customization work or configuration services to integrate with a provider’s existing systems,

revenue may need to be recognized over time based on the completion of project milestones

or percentage of services provided.

- Data Monetization: As wearable devices and health apps collect more personal data on

users, some companies are exploring ways to monetize aggregate and anonymized user

data. However, accounting standards have not fully caught up with data monetization

models yet, so revenue recognition policies may need to consider the nature and timing of

benefits transferred to the customer.

In general, mHealth companies need to carefully evaluate the various revenue streams from

their business model and apply the appropriate revenue recognition treatment that aligns

with accounting standards. Proper revenue recognition is important for financial reporting

credibility and compliance.

Accounting for Research and Development Costs

Another major accounting area is the treatment of research and development (R&D) costs.

For mHealth companies, a significant portion of expenses may be spent on developing new

app features and technologies, as well as updating existing products. Under accounting

principles, R&D costs must be expensed as incurred rather than capitalized, with a few

exceptions:

model is complete.

they are clearly related to a specific project and generate identifiable assets with probable

future economic benefits, in which case they can be included in the capitalized amount.

Properly distinguishing R&D costs from other capitalizable costs is important for financial

amounts. It also impacts metrics such as operating margins and return on assets that are

important for investors. Companies need to establish clear accounting policies around

capitalization thresholds.

Developing Appropriate Cost Structures

support and other post-sale customer services. May be included in COGS or operating

expenses depending on nature.

delivering digital products and services. Treated as operating expenses.

- Software Development Costs - Payroll, contractor fees, licenses, etc. for developing and

updating apps/devices. Treated as R&D expenses or capitalized assets depending on

nature.

- Marketing & Selling Expenses - Payroll, ads, commissions, trade shows for sales &

marketing activities. Operating expenses.

Proper classification and allocation of costs is required under accounting principles and

performance analysis against industry peers.

Tax Implications of mHealth

There are also tax implications specific to the mHealth industry that companies need to be

aware of:

penalties and back taxes owed. The mobile, remote nature of mHealth work needs careful

review under various employment laws.

- R&D Tax Credits - Governments offer tax incentives to encourage innovation. mHealth

local levels.

- Capitalization of Intangible Assets - For tax purposes, certain R&D and acquisition costs

may be eligible for capitalization as intangible assets and amortized over 15 years under

Section 174 and Section 197, respectively, to reduce current tax expenses.

- Segment Reporting - Digital health operations may involve distinct business units providing

varying products/services requiring segment disclosures.

- Key Performance Indicators - Important non-GAAP metrics like monthly/daily active users,

customer retention rates, churn, should be defined consistently and disclosed along with

required GAAP measures.

- Sensitivity Analysis - The rapidly evolving digital health industry is prone to disruption.

Analytics on impact of technology changes, competitor actions needs to be provided.

- Revenue Concentration - Over-reliance on few customers increases risk. Disclosure on %

of revenues from major customers assures investors of diversification.

discussion on identification, valuation and impairment review of intangibles on the balance

sheet.

- Liquidity and Capital Resources - Startups require focused analysis to assure adequate

funding available to meet obligations and execute growth strategy for next 12 months.

custody of assets to prevent errors and fraud.

- Access Controls - Restricting system access through layered authentication and

authorization for different user types.

- Data Integrity Checks - Implementing validation controls to ensure accuracy and

completeness of key datasets like user profiles, transactions.

- Change Management - Formal processes to track, test and approve deployment of product

updates impacting financial results.

offline data redundancy to minimize financial disruptions.

- Vendor Management - Third party risks necessitate controls over selection of strategic

Implementing and testing of these foundational controls provide assurance over financial

information and reduce compliance violations in the dynamic mHealth domain.

Career Prospects in mHealth Accounting

As mobile health continues its rapid adoption worldwide, job opportunities are growing

significantly for accounting and finance professionals with expertise in this emerging sector.

Some potential career paths include:

strategic guidance for digital health ventures.

- Digital Health Auditor - Evaluate internal controls, audit financials of mHealth firms for SOX,

IPO readiness with a public accounting firm.

- Corporate Finance Manager - Lead financial planning, reporting, analysis functions for

financial lens at venture capital, private equity firms.

filings and audits leveraging technology incentives.

- Financial Systems Consultant - Implement ERP, billing solutions tailored for unique needs

of mHealth like subscription-based models.

Accounting skills combined with specialized knowledge of healthcare technologies deliver

high career impact. Pursuing relevant certifications like CPA, CMA enhances professional

qualifications for the digital health finance domain.

Conclusion

technology and healthcare finance.

The field of mobile health, also known as mHealth, has seen tremendous growth in recent

wireless technologies like mobile devices, wearable devices, wireless networks to deliver

health information and services. As the use of mHealth applications and wearable devices

grows, so too does the need for financial reporting and accounting standards specific to this

industry. This paper will explore some of the key financial reporting and accounting

considerations for mHealth applications and wearable devices, including revenue

recognition, developing cost structures, research and development expenses, and tax

implications.

Revenue Recognition for mHealth Apps and Devices

recognize revenue from the sale and use of mobile applications and wearable devices.

There are a few different revenue streams to consider:

- Upfront Application/Device Sales: For mHealth apps or devices sold as a one-time

purchase, revenue would generally be recognized upon delivery or download of the product

to the customer. This follows the core revenue recognition principle of recognizing revenue

where customers pay a recurring fee (monthly, annually, etc.) for ongoing access to app

revenue, the general principle is to recognize it when an ad impression is delivered.

However, with performance-based ads where payment is dependent on user engagement

(e.g. click-through), revenue recognition may need to wait until the user performs the desired

action.

- Customization/Configuration Services: For mHealth solutions that involve significant

customization work or configuration services to integrate with a provider’s existing systems,

revenue may need to be recognized over time based on the completion of project milestones

or percentage of services provided.

with accounting standards. Proper revenue recognition is important for financial reporting

credibility and compliance.

Another major accounting area is the treatment of research and development (R&D) costs.

For mHealth companies, a significant portion of expenses may be spent on developing new

app features and technologies, as well as updating existing products. Under accounting

principles, R&D costs must be expensed as incurred rather than capitalized, with a few

exceptions:

- R&D Tax Credits - Governments offer tax incentives to encourage innovation. mHealth

companies should evaluate eligibility for and utilize available R&D tax credits at federal and

local levels.

may be eligible for capitalization as intangible assets and amortized over 15 years under

Section 174 and Section 197, respectively, to reduce current tax expenses.

Proper tax planning and compliance is essential given the complex multi-jurisdictional nature

of digital businesses. mHealth companies need knowledgeable tax and accounting

specialists.

mHealth companies or those seeking external funding. Some considerations include:

customer retention rates, churn, should be defined consistently and disclosed along with

required GAAP measures.

- Sensitivity Analysis - The rapidly evolving digital health industry is prone to disruption.

- Revenue Concentration - Over-reliance on few customers increases risk. Disclosure on %

of revenues from major customers assures investors of diversification.

- Intangible Assets - Growing importance of brands, IP, customer data warrants expanded

Standard setters may need to provide additional guidance for unique mHealth companies.

Internal Controls in mHealth Accounting

are paramount over financial reporting in mHealth companies. Key considerations include:

- Segregation of Duties - Proper separation of responsibilities over records, transactions,

custody of assets to prevent errors and fraud.

- Access Controls - Restricting system access through layered authentication and

authorization for different user types.

- Data Integrity Checks - Implementing validation controls to ensure accuracy and

- Change Management - Formal processes to track, test and approve deployment of product

updates impacting financial results.

- Inventory Management - Robust governance needed for tracking digital inventories like app

licenses, subscription plans to maintain integrity of deferred revenue balances.

- Vendor Management - Third party risks necessitate controls over selection of strategic

Implementing and testing of these foundational controls provide assurance over financial

information and reduce compliance violations in the dynamic mHealth domain.

As mobile health continues its rapid adoption worldwide, job opportunities are growing

significantly for accounting and finance professionals with expertise in this emerging sector.

Some potential career paths include:

- mHealth Startup CFO/Controller - Oversee all financial operations, fundraising and

- FinTech Analyst - Evaluate new healthcare technology investments, m&a deals from a

financial lens at venture capital, private equity firms.

wearables with HIPAA, FDA, various jurisdictional regulations.

- Tax Manager - Advise digital health companies on optimum tax structuring, manage tax

filings and audits leveraging technology incentives.

- Financial Systems Consultant - Implement ERP, billing solutions tailored for unique needs

of mHealth like subscription-based models.

Accounting skills combined with specialized knowledge of healthcare technologies deliver

qualifications for the digital health finance domain.

Conclusion

In summary, the emerging field of mobile health is disrupting traditional healthcare delivery

and unlocking new opportunities for financial professionals to play important roles. While

core accounting and reporting principles still apply, mHealth introduces novel considerations

accelerates, understanding financial implications will be paramount for stakeholders across

The field of mobile health, also known as mHealth, has seen tremendous growth in recent

wireless technologies like mobile devices, wearable devices, wireless networks to deliver

health information and services. As the use of mHealth applications and wearable devices

grows, so too does the need for financial reporting and accounting standards specific to this

industry. This paper will explore some of the key financial reporting and accounting

recognition, developing cost structures, research and development expenses, and tax

implications.

Revenue Recognition for mHealth Apps and Devices

One of the biggest accounting questions facing the mHealth industry regards how to properly

- Subscription Services: Many mHealth apps and devices rely on ongoing subscription plans

where customers pay a recurring fee (monthly, annually, etc.) for ongoing access to app

features, service/technical support, cloud data storage, and software updates. For

the customer simultaneously receives and consumes the benefits.

- Advertising: Some free mHealth apps generate revenue from in-app advertising. For ad

revenue, the general principle is to recognize it when an ad impression is delivered.

However, with performance-based ads where payment is dependent on user engagement

(e.g. click-through), revenue recognition may need to wait until the user performs the desired

action.

- Customization/Configuration Services: For mHealth solutions that involve significant

revenue may need to be recognized over time based on the completion of project milestones

or percentage of services provided.

- Data Monetization: As wearable devices and health apps collect more personal data on

users, some companies are exploring ways to monetize aggregate and anonymized user

data. However, accounting standards have not fully caught up with data monetization

In general, mHealth companies need to carefully evaluate the various revenue streams from

Another major accounting area is the treatment of research and development (R&D) costs.

For mHealth companies, a significant portion of expenses may be spent on developing new

app features and technologies, as well as updating existing products. Under accounting

principles, R&D costs must be expensed as incurred rather than capitalized, with a few

- Costs incurred after technological feasibility has been established should be capitalized as

an intangible asset. Technological feasibility for software is typically reached when a working

model is complete.

reporting and compliance with standards like ASC 730 for separately reporting R&D expense

amounts. It also impacts metrics such as operating margins and return on assets that are

important for investors. Companies need to establish clear accounting policies around

Developing Appropriate Cost Structures

Another accounting consideration is to properly categorize costs into the appropriate buckets

of costs of goods sold (COGS), operating expenses, assets, etc. For mHealth companies,

the major cost categories may include:

- Cost of Goods Sold (COGS) - Direct materials, labor, freight costs associated with

producing apps, devices and related products/services.

- Fulfillment Costs - Expenses related to order processing, shipping/handling, customer

expenses depending on nature.

- Infrastructure Costs - Server hosting, bandwidth, payment processing fees required for

delivering digital products and services. Treated as operating expenses.

- Software Development Costs - Payroll, contractor fees, licenses, etc. for developing and

- Marketing & Selling Expenses - Payroll, ads, commissions, trade shows for sales &

provides transparency into a company’s finances. It also enables benchmarking and

Tax Implications of mHealth

There are also tax implications specific to the mHealth industry that companies need to be

aware of:

- Geographical Nexus - Digital businesses need to carefully evaluate tax nexus creation

based on location of employees, servers, customers to determine economic presence

creating income/sales tax filing obligations in different jurisdictions.

- Digital Goods Taxation - Many states/countries seek to tax digital goods and services.

companies should evaluate eligibility for and utilize available R&D tax credits at federal and

local levels.

may be eligible for capitalization as intangible assets and amortized over 15 years under

Section 174 and Section 197, respectively, to reduce current tax expenses.

Proper tax planning and compliance is essential given the complex multi-jurisdictional nature

of digital businesses. mHealth companies need knowledgeable tax and accounting

specialists.

Financial Reporting Considerations

There are also financial reporting and disclosure requirements specific to publicly traded

mHealth companies or those seeking external funding. Some considerations include:

- Segment Reporting - Digital health operations may involve distinct business units providing

varying products/services requiring segment disclosures.

- Key Performance Indicators - Important non-GAAP metrics like monthly/daily active users,

customer retention rates, churn, should be defined consistently and disclosed along with

required GAAP measures.

- Intangible Assets - Growing importance of brands, IP, customer data warrants expanded

sheet.

- Liquidity and Capital Resources - Startups require focused analysis to assure adequate

funding available to meet obligations and execute growth strategy for next 12 months.

Robust financial reporting and disclosures help stakeholders properly evaluate a company’s

financial position, performance, risks and future outlook in this new and changing sector.

Standard setters may need to provide additional guidance for unique mHealth companies.

Internal Controls in mHealth Accounting

- Data Integrity Checks - Implementing validation controls to ensure accuracy and

completeness of key datasets like user profiles, transactions.

- Change Management - Formal processes to track, test and approve deployment of product

updates impacting financial results.

- Inventory Management - Robust governance needed for tracking digital inventories like app

licenses, subscription plans to maintain integrity of deferred revenue balances.

- Cybersecurity - Protecting financial data through endpoint protection, network security

controls and monitoring threats against systems.

- Disaster Recovery - Ensuring business continuity through tested backup infrastructure,

- Vendor Management - Third party risks necessitate controls over selection of strategic

partners processing sensitive info.

Implementing and testing of these foundational controls provide assurance over financial

information and reduce compliance violations in the dynamic mHealth domain.

significantly for accounting and finance professionals with expertise in this emerging sector.

strategic guidance for digital health ventures.

- Digital Health Auditor - Evaluate internal controls, audit financials of mHealth firms for SOX,

IPO readiness with a public accounting firm.

- Corporate Finance Manager - Lead financial planning, reporting, analysis functions for

- FinTech Analyst - Evaluate new healthcare technology investments, m&a deals from a

financial lens at venture capital, private equity firms.

- Compliance Accountant - Monitor ongoing compliance of mHealth applications, services,

Accounting skills combined with specialized knowledge of healthcare technologies deliver

high career impact. Pursuing relevant certifications like CPA, CMA enhances professional

qualifications for the digital health finance domain.

Conclusion

In summary, the emerging field of mobile health is disrupting traditional healthcare delivery

and unlocking new opportunities for financial professionals to play important roles. While

core accounting and reporting principles still apply, mHealth introduces novel considerations

around revenue streams, cost structures, intellectual property, and multi-jurisdictional

compliance that require adapted frameworks. Robust internal controls and governance are

equally critical given technical and security risks. As digital transformation of healthcare

accelerates, understanding financial implications will be paramount for stakeholders across

the ecosystem. Overall, mHealth presents exciting prospects at the intersection of

technology and healthcare finance.

The field of mobile health, also known as mHealth, has seen tremendous growth in recent

years with the rise of smartphones and other mobile devices. mHealth uses mobile and

wireless technologies like mobile devices, wearable devices, wireless networks to deliver

health information and services. As the use of mHealth applications and wearable devices

grows, so too does the need for financial reporting and accounting standards specific to this

industry. This paper will explore some of the key financial reporting and accounting

There are a few different revenue streams to consider:

- Upfront Application/Device Sales: For mHealth apps or devices sold as a one-time

purchase, revenue would generally be recognized upon delivery or download of the product

to the customer. This follows the core revenue recognition principle of recognizing revenue

when control of the good or service is transferred to the customer.

- Subscription Services: Many mHealth apps and devices rely on ongoing subscription plans

where customers pay a recurring fee (monthly, annually, etc.) for ongoing access to app

features, service/technical support, cloud data storage, and software updates. For

subscription services, revenue should be recognized ratably over the subscription period as

the customer simultaneously receives and consumes the benefits.

customization work or configuration services to integrate with a provider’s existing systems,

revenue may need to be recognized over time based on the completion of project milestones

or percentage of services provided.

- Data Monetization: As wearable devices and health apps collect more personal data on

users, some companies are exploring ways to monetize aggregate and anonymized user

data. However, accounting standards have not fully caught up with data monetization

models yet, so revenue recognition policies may need to consider the nature and timing of

benefits transferred to the customer.

In general, mHealth companies need to carefully evaluate the various revenue streams from

their business model and apply the appropriate revenue recognition treatment that aligns

with accounting standards. Proper revenue recognition is important for financial reporting

credibility and compliance.

Accounting for Research and Development Costs

Another major accounting area is the treatment of research and development (R&D) costs.

For mHealth companies, a significant portion of expenses may be spent on developing new

app features and technologies, as well as updating existing products. Under accounting

principles, R&D costs must be expensed as incurred rather than capitalized, with a few

exceptions:

model is complete.

they are clearly related to a specific project and generate identifiable assets with probable

future economic benefits, in which case they can be included in the capitalized amount.

Properly distinguishing R&D costs from other capitalizable costs is important for financial

amounts. It also impacts metrics such as operating margins and return on assets that are

important for investors. Companies need to establish clear accounting policies around

capitalization thresholds.

Developing Appropriate Cost Structures

support and other post-sale customer services. May be included in COGS or operating

expenses depending on nature.

delivering digital products and services. Treated as operating expenses.

- Software Development Costs - Payroll, contractor fees, licenses, etc. for developing and

updating apps/devices. Treated as R&D expenses or capitalized assets depending on

nature.

- Marketing & Selling Expenses - Payroll, ads, commissions, trade shows for sales &

marketing activities. Operating expenses.

Proper classification and allocation of costs is required under accounting principles and

performance analysis against industry peers.

Tax Implications of mHealth

There are also tax implications specific to the mHealth industry that companies need to be

aware of:

penalties and back taxes owed. The mobile, remote nature of mHealth work needs careful

review under various employment laws.

- R&D Tax Credits - Governments offer tax incentives to encourage innovation. mHealth

local levels.

- Capitalization of Intangible Assets - For tax purposes, certain R&D and acquisition costs

may be eligible for capitalization as intangible assets and amortized over 15 years under

Section 174 and Section 197, respectively, to reduce current tax expenses.

- Segment Reporting - Digital health operations may involve distinct business units providing

varying products/services requiring segment disclosures.

- Key Performance Indicators - Important non-GAAP metrics like monthly/daily active users,

customer retention rates, churn, should be defined consistently and disclosed along with

required GAAP measures.

- Sensitivity Analysis - The rapidly evolving digital health industry is prone to disruption.

Analytics on impact of technology changes, competitor actions needs to be provided.

- FinTech Analyst - Evaluate new healthcare technology investments, m&a deals from a

financial lens at venture capital, private equity firms.

wearables with HIPAA, FDA, various jurisdictional regulations.

- Tax Manager - Advise digital health companies on optimum tax structuring, manage tax

filings and audits leveraging technology incentives.

- Financial Systems Consultant - Implement ERP, billing solutions tailored for unique needs

high career impact. Pursuing relevant certifications like CPA, CMA enhances professional

In summary, the emerging field of mobile health is disrupting traditional healthcare delivery

core accounting and reporting principles still apply, mHealth introduces novel considerations

around revenue streams, cost structures, intellectual property, and multi-jurisdictional

compliance that require adapted frameworks. Robust internal controls and governance are

equally critical given technical and security risks. As digital transformation of healthcare

the ecosystem. Overall, mHealth presents exciting prospects at the intersection of

technology and healthcare finance.

The field of mobile health, also known as mHealth, has seen tremendous growth in recent

years with the rise of smartphones and other mobile devices. mHealth uses mobile and

Revenue Recognition for mHealth Apps and Devices

One of the biggest accounting questions facing the mHealth industry regards how to properly

recognize revenue from the sale and use of mobile applications and wearable devices.

- Upfront Application/Device Sales: For mHealth apps or devices sold as a one-time

purchase, revenue would generally be recognized upon delivery or download of the product

to the customer. This follows the core revenue recognition principle of recognizing revenue

when control of the good or service is transferred to the customer.

- Subscription Services: Many mHealth apps and devices rely on ongoing subscription plans

where customers pay a recurring fee (monthly, annually, etc.) for ongoing access to app

features, service/technical support, cloud data storage, and software updates. For

subscription services, revenue should be recognized ratably over the subscription period as

- Advertising: Some free mHealth apps generate revenue from in-app advertising. For ad

revenue, the general principle is to recognize it when an ad impression is delivered.

However, with performance-based ads where payment is dependent on user engagement

(e.g. click-through), revenue recognition may need to wait until the user performs the desired

action.

revenue may need to be recognized over time based on the completion of project milestones

users, some companies are exploring ways to monetize aggregate and anonymized user

models yet, so revenue recognition policies may need to consider the nature and timing of

benefits transferred to the customer.

In general, mHealth companies need to carefully evaluate the various revenue streams from

with accounting standards. Proper revenue recognition is important for financial reporting

credibility and compliance.

Accounting for Research and Development Costs

Another major accounting area is the treatment of research and development (R&D) costs.

- External, identifiable development costs for materials, equipment, etc. that generate

probable future economic benefits can be capitalized.

- Internal R&D costs such as employee compensation should generally be expensed, unless

they are clearly related to a specific project and generate identifiable assets with probable

future economic benefits, in which case they can be included in the capitalized amount.

Properly distinguishing R&D costs from other capitalizable costs is important for financial

reporting and compliance with standards like ASC 730 for separately reporting R&D expense

amounts. It also impacts metrics such as operating margins and return on assets that are

important for investors. Companies need to establish clear accounting policies around

capitalization thresholds.

Another accounting consideration is to properly categorize costs into the appropriate buckets

of costs of goods sold (COGS), operating expenses, assets, etc. For mHealth companies,

the major cost categories may include:

- Cost of Goods Sold (COGS) - Direct materials, labor, freight costs associated with

producing apps, devices and related products/services.

expenses depending on nature.

updating apps/devices. Treated as R&D expenses or capitalized assets depending on

nature.

- Marketing & Selling Expenses - Payroll, ads, commissions, trade shows for sales &

Proper classification and allocation of costs is required under accounting principles and

provides transparency into a company’s finances. It also enables benchmarking and

performance analysis against industry peers.

- Digital Goods Taxation - Many states/countries seek to tax digital goods and services.

Companies need clear understanding of which digital products and services may trigger

sales/VAT taxation based on local laws.

- Employee vs. Contractor Classification - Incorrect worker classification can lead to

penalties and back taxes owed. The mobile, remote nature of mHealth work needs careful

review under various employment laws.

- R&D Tax Credits - Governments offer tax incentives to encourage innovation. mHealth

companies should evaluate eligibility for and utilize available R&D tax credits at federal and

local levels.

may be eligible for capitalization as intangible assets and amortized over 15 years under

Section 174 and Section 197, respectively, to reduce current tax expenses.

Proper tax planning and compliance is essential given the complex multi-jurisdictional nature

of digital businesses. mHealth companies need knowledgeable tax and accounting

specialists.

mHealth companies or those seeking external funding. Some considerations include:

customer retention rates, churn, should be defined consistently and disclosed along with

required GAAP measures.

- Sensitivity Analysis - The rapidly evolving digital health industry is prone to disruption.

- Revenue Concentration - Over-reliance on few customers increases risk. Disclosure on %

of revenues from major customers assures investors of diversification.

- Intangible Assets - Growing importance of brands, IP, customer data warrants expanded

Standard setters may need to provide additional guidance for unique mHealth companies.

Internal Controls in mHealth Accounting

are paramount over financial reporting in mHealth companies. Key considerations include:

- Segregation of Duties - Proper separation of responsibilities over records, transactions,

custody of assets to prevent errors and fraud.

- Access Controls - Restricting system access through layered authentication and

authorization for different user types.

- Data Integrity Checks - Implementing validation controls to ensure accuracy and

- Change Management - Formal processes to track, test and approve deployment of product

updates impacting financial results.

- Inventory Management - Robust governance needed for tracking digital inventories like app

licenses, subscription plans to maintain integrity of deferred revenue balances.

- Vendor Management - Third party risks necessitate controls over selection of strategic

Implementing and testing of these foundational controls provide assurance over financial

information and reduce compliance violations in the dynamic mHealth domain.

As mobile health continues its rapid adoption worldwide, job opportunities are growing

significantly for accounting and finance professionals with expertise in this emerging sector.

Some potential career paths include:

- mHealth Startup CFO/Controller - Oversee all financial operations, fundraising and

- FinTech Analyst - Evaluate new healthcare technology investments, m&a deals from a

financial lens at venture capital, private equity firms.

wearables with HIPAA, FDA, various jurisdictional regulations.

- Tax Manager - Advise digital health companies on optimum tax structuring, manage tax

filings and audits leveraging technology incentives.

- Financial Systems Consultant - Implement ERP, billing solutions tailored for unique needs

of mHealth like subscription-based models.

Accounting skills combined with specialized knowledge of healthcare technologies deliver

qualifications for the digital health finance domain.

Conclusion

In summary, the emerging field of mobile health is disrupting traditional healthcare delivery

and unlocking new opportunities for financial professionals to play important roles. While

core accounting and reporting principles still apply, mHealth introduces novel considerations

accelerates, understanding financial implications will be paramount for stakeholders across

The field of mobile health, also known as mHealth, has seen tremendous growth in recent

wireless technologies like mobile devices, wearable devices, wireless networks to deliver

health information and services. As the use of mHealth applications and wearable devices

grows, so too does the need for financial reporting and accounting standards specific to this

industry. This paper will explore some of the key financial reporting and accounting

recognition, developing cost structures, research and development expenses, and tax

implications.

Revenue Recognition for mHealth Apps and Devices

One of the biggest accounting questions facing the mHealth industry regards how to properly

- Subscription Services: Many mHealth apps and devices rely on ongoing subscription plans

where customers pay a recurring fee (monthly, annually, etc.) for ongoing access to app

features, service/technical support, cloud data storage, and software updates. For

the customer simultaneously receives and consumes the benefits.

- Advertising: Some free mHealth apps generate revenue from in-app advertising. For ad

revenue, the general principle is to recognize it when an ad impression is delivered.

However, with performance-based ads where payment is dependent on user engagement

(e.g. click-through), revenue recognition may need to wait until the user performs the desired

action.

- Customization/Configuration Services: For mHealth solutions that involve significant

revenue may need to be recognized over time based on the completion of project milestones

or percentage of services provided.

- Data Monetization: As wearable devices and health apps collect more personal data on

users, some companies are exploring ways to monetize aggregate and anonymized user

data. However, accounting standards have not fully caught up with data monetization

In general, mHealth companies need to carefully evaluate the various revenue streams from

Another major accounting area is the treatment of research and development (R&D) costs.

For mHealth companies, a significant portion of expenses may be spent on developing new

app features and technologies, as well as updating existing products. Under accounting

principles, R&D costs must be expensed as incurred rather than capitalized, with a few

- Costs incurred after technological feasibility has been established should be capitalized as

an intangible asset. Technological feasibility for software is typically reached when a working

model is complete.

reporting and compliance with standards like ASC 730 for separately reporting R&D expense

amounts. It also impacts metrics such as operating margins and return on assets that are

important for investors. Companies need to establish clear accounting policies around

Developing Appropriate Cost Structures

Another accounting consideration is to properly categorize costs into the appropriate buckets

of costs of goods sold (COGS), operating expenses, assets, etc. For mHealth companies,

the major cost categories may include:

- Cost of Goods Sold (COGS) - Direct materials, labor, freight costs associated with

producing apps, devices and related products/services.

- Fulfillment Costs - Expenses related to order processing, shipping/handling, customer

expenses depending on nature.

- Infrastructure Costs - Server hosting, bandwidth, payment processing fees required for

delivering digital products and services. Treated as operating expenses.

- Software Development Costs - Payroll, contractor fees, licenses, etc. for developing and

- Marketing & Selling Expenses - Payroll, ads, commissions, trade shows for sales &

provides transparency into a company’s finances. It also enables benchmarking and

Tax Implications of mHealth

There are also tax implications specific to the mHealth industry that companies need to be

aware of:

- Geographical Nexus - Digital businesses need to carefully evaluate tax nexus creation

based on location of employees, servers, customers to determine economic presence

creating income/sales tax filing obligations in different jurisdictions.

- Digital Goods Taxation - Many states/countries seek to tax digital goods and services.

companies should evaluate eligibility for and utilize available R&D tax credits at federal and

local levels.

may be eligible for capitalization as intangible assets and amortized over 15 years under

Section 174 and Section 197, respectively, to reduce current tax expenses.

Proper tax planning and compliance is essential given the complex multi-jurisdictional nature

of digital businesses. mHealth companies need knowledgeable tax and accounting

specialists.

Financial Reporting Considerations

There are also financial reporting and disclosure requirements specific to publicly traded

mHealth companies or those seeking external funding. Some considerations include:

- Segment Reporting - Digital health operations may involve distinct business units providing

varying products/services requiring segment disclosures.

- Key Performance Indicators - Important non-GAAP metrics like monthly/daily active users,

customer retention rates, churn, should be defined consistently and disclosed along with

required GAAP measures.

- Intangible Assets - Growing importance of brands, IP, customer data warrants expanded

sheet.

- Liquidity and Capital Resources - Startups require focused analysis to assure adequate

funding available to meet obligations and execute growth strategy for next 12 months.

Robust financial reporting and disclosures help stakeholders properly evaluate a company’s

financial position, performance, risks and future outlook in this new and changing sector.

Standard setters may need to provide additional guidance for unique mHealth companies.

Internal Controls in mHealth Accounting

- Data Integrity Checks - Implementing validation controls to ensure accuracy and

completeness of key datasets like user profiles, transactions.

- Change Management - Formal processes to track, test and approve deployment of product

updates impacting financial results.

- Inventory Management - Robust governance needed for tracking digital inventories like app

licenses, subscription plans to maintain integrity of deferred revenue balances.

- Cybersecurity - Protecting financial data through endpoint protection, network security

controls and monitoring threats against systems.

- Disaster Recovery - Ensuring business continuity through tested backup infrastructure,

- Vendor Management - Third party risks necessitate controls over selection of strategic

partners processing sensitive info.

Implementing and testing of these foundational controls provide assurance over financial

information and reduce compliance violations in the dynamic mHealth domain.

significantly for accounting and finance professionals with expertise in this emerging sector.

strategic guidance for digital health ventures.

- Digital Health Auditor - Evaluate internal controls, audit financials of mHealth firms for SOX,

IPO readiness with a public accounting firm.

- Corporate Finance Manager - Lead financial planning, reporting, analysis functions for

- FinTech Analyst - Evaluate new healthcare technology investments, m&a deals from a

financial lens at venture capital, private equity firms.

- Compliance Accountant - Monitor ongoing compliance of mHealth applications, services,

Accounting skills combined with specialized knowledge of healthcare technologies deliver

high career impact. Pursuing relevant certifications like CPA, CMA enhances professional

qualifications for the digital health finance domain.

Conclusion

In summary, the emerging field of mobile health is disrupting traditional healthcare delivery

and unlocking new opportunities for financial professionals to play important roles. While

core accounting and reporting principles still apply, mHealth introduces novel considerations

around revenue streams, cost structures, intellectual property, and multi-jurisdictional

compliance that require adapted frameworks. Robust internal controls and governance are

- Costs incurred after technological feasibility has been established should be capitalized as

an intangible asset. Technological feasibility for software is typically reached when a working

model is complete.

probable future economic benefits can be capitalized.

- Internal R&D costs such as employee compensation should generally be expensed, unless

they are clearly related to a specific project and generate identifiable assets with probable

future economic benefits, in which case they can be included in the capitalized amount.

important for investors. Companies need to establish clear accounting policies around

Another accounting consideration is to properly categorize costs into the appropriate buckets

the major cost categories may include:

- Cost of Goods Sold (COGS) - Direct materials, labor, freight costs associated with

producing apps, devices and related products/services.

- Fulfillment Costs - Expenses related to order processing, shipping/handling, customer

support and other post-sale customer services. May be included in COGS or operating

expenses depending on nature.

- Infrastructure Costs - Server hosting, bandwidth, payment processing fees required for

Proper classification and allocation of costs is required under accounting principles and

provides transparency into a company’s finances. It also enables benchmarking and

Tax Implications of mHealth

There are also tax implications specific to the mHealth industry that companies need to be

aware of:

- Geographical Nexus - Digital businesses need to carefully evaluate tax nexus creation

based on location of employees, servers, customers to determine economic presence

creating income/sales tax filing obligations in different jurisdictions.

Companies need clear understanding of which digital products and services may trigger

sales/VAT taxation based on local laws.

- Employee vs. Contractor Classification - Incorrect worker classification can lead to

penalties and back taxes owed. The mobile, remote nature of mHealth work needs careful

review under various employment laws.

local levels.

Section 174 and Section 197, respectively, to reduce current tax expenses.

Proper tax planning and compliance is essential given the complex multi-jurisdictional nature

of digital businesses. mHealth companies need knowledgeable tax and accounting

specialists.

There are also financial reporting and disclosure requirements specific to publicly traded

mHealth companies or those seeking external funding. Some considerations include:

- Segment Reporting - Digital health operations may involve distinct business units providing

varying products/services requiring segment disclosures.

- Revenue Concentration - Over-reliance on few customers increases risk. Disclosure on %

of revenues from major customers assures investors of diversification.

discussion on identification, valuation and impairment review of intangibles on the balance

sheet.

- Liquidity and Capital Resources - Startups require focused analysis to assure adequate

funding available to meet obligations and execute growth strategy for next 12 months.

Robust financial reporting and disclosures help stakeholders properly evaluate a company’s

financial position, performance, risks and future outlook in this new and changing sector.

Standard setters may need to provide additional guidance for unique mHealth companies.

Given the technical complexity and risks in digital health operations, strong internal controls

are paramount over financial reporting in mHealth companies. Key considerations include:

- Segregation of Duties - Proper separation of responsibilities over records, transactions,

custody of assets to prevent errors and fraud.

- Data Integrity Checks - Implementing validation controls to ensure accuracy and

updates impacting financial results.

- Inventory Management - Robust governance needed for tracking digital inventories like app

licenses, subscription plans to maintain integrity of deferred revenue balances.

- Cybersecurity - Protecting financial data through endpoint protection, network security

- Disaster Recovery - Ensuring business continuity through tested backup infrastructure,

offline data redundancy to minimize financial disruptions.

- Vendor Management - Third party risks necessitate controls over selection of strategic

Some potential career paths include:

- mHealth Startup CFO/Controller - Oversee all financial operations, fundraising and

- Digital Health Auditor - Evaluate internal controls, audit financials of mHealth firms for SOX,

IPO readiness with a public accounting firm.

- Corporate Finance Manager - Lead financial planning, reporting, analysis functions for

mHealth division/products at healthcare providers or insurers.

- FinTech Analyst - Evaluate new healthcare technology investments, m&a deals from a

financial lens at venture capital, private equity firms.

wearables with HIPAA, FDA, various jurisdictional regulations.

- Tax Manager - Advise digital health companies on optimum tax structuring, manage tax

filings and audits leveraging technology incentives.

- Financial Systems Consultant - Implement ERP, billing solutions tailored for unique needs

high career impact. Pursuing relevant certifications like CPA, CMA enhances professional

In summary, the emerging field of mobile health is disrupting traditional healthcare delivery

core accounting and reporting principles still apply, mHealth introduces novel considerations

around revenue streams, cost structures, intellectual property, and multi-jurisdictional

compliance that require adapted frameworks. Robust internal controls and governance are

equally critical given technical and security risks. As digital transformation of healthcare

the ecosystem. Overall, mHealth presents exciting prospects at the intersection of

technology and healthcare finance.

The field of mobile health, also known as mHealth, has seen tremendous growth in recent

years with the rise of smartphones and other mobile devices. mHealth uses mobile and

Revenue Recognition for mHealth Apps and Devices

One of the biggest accounting questions facing the mHealth industry regards how to properly

recognize revenue from the sale and use of mobile applications and wearable devices.

- Upfront Application/Device Sales: For mHealth apps or devices sold as a one-time

purchase, revenue would generally be recognized upon delivery or download of the product

to the customer. This follows the core revenue recognition principle of recognizing revenue

when control of the good or service is transferred to the customer.

- Subscription Services: Many mHealth apps and devices rely on ongoing subscription plans

where customers pay a recurring fee (monthly, annually, etc.) for ongoing access to app

features, service/technical support, cloud data storage, and software updates. For

subscription services, revenue should be recognized ratably over the subscription period as

- Advertising: Some free mHealth apps generate revenue from in-app advertising. For ad

revenue, the general principle is to recognize it when an ad impression is delivered.

However, with performance-based ads where payment is dependent on user engagement

(e.g. click-through), revenue recognition may need to wait until the user performs the desired

action.

revenue may need to be recognized over time based on the completion of project milestones

users, some companies are exploring ways to monetize aggregate and anonymized user

models yet, so revenue recognition policies may need to consider the nature and timing of

benefits transferred to the customer.

In general, mHealth companies need to carefully evaluate the various revenue streams from

with accounting standards. Proper revenue recognition is important for financial reporting

credibility and compliance.

Accounting for Research and Development Costs

Another major accounting area is the treatment of research and development (R&D) costs.

- External, identifiable development costs for materials, equipment, etc. that generate

probable future economic benefits can be capitalized.

- Internal R&D costs such as employee compensation should generally be expensed, unless

they are clearly related to a specific project and generate identifiable assets with probable

future economic benefits, in which case they can be included in the capitalized amount.

Properly distinguishing R&D costs from other capitalizable costs is important for financial

reporting and compliance with standards like ASC 730 for separately reporting R&D expense

amounts. It also impacts metrics such as operating margins and return on assets that are

important for investors. Companies need to establish clear accounting policies around

capitalization thresholds.

Another accounting consideration is to properly categorize costs into the appropriate buckets

of costs of goods sold (COGS), operating expenses, assets, etc. For mHealth companies,

the major cost categories may include:

- Cost of Goods Sold (COGS) - Direct materials, labor, freight costs associated with

producing apps, devices and related products/services.

expenses depending on nature.

updating apps/devices. Treated as R&D expenses or capitalized assets depending on

nature.

- Marketing & Selling Expenses - Payroll, ads, commissions, trade shows for sales &

Proper classification and allocation of costs is required under accounting principles and

provides transparency into a company’s finances. It also enables benchmarking and

performance analysis against industry peers.

- Digital Goods Taxation - Many states/countries seek to tax digital goods and services.

Companies need clear understanding of which digital products and services may trigger

sales/VAT taxation based on local laws.

- Employee vs. Contractor Classification - Incorrect worker classification can lead to

penalties and back taxes owed. The mobile, remote nature of mHealth work needs careful

review under various employment laws.

- R&D Tax Credits - Governments offer tax incentives to encourage innovation. mHealth

companies should evaluate eligibility for and utilize available R&D tax credits at federal and

local levels.

may be eligible for capitalization as intangible assets and amortized over 15 years under

Section 174 and Section 197, respectively, to reduce current tax expenses.

Proper tax planning and compliance is essential given the complex multi-jurisdictional nature

of digital businesses. mHealth companies need knowledgeable tax and accounting

specialists.

mHealth companies or those seeking external funding. Some considerations include:

customer retention rates, churn, should be defined consistently and disclosed along with

required GAAP measures.

- Sensitivity Analysis - The rapidly evolving digital health industry is prone to disruption.

- Revenue Concentration - Over-reliance on few customers increases risk. Disclosure on %

of revenues from major customers assures investors of diversification.

- Intangible Assets - Growing importance of brands, IP, customer data warrants expanded

Standard setters may need to provide additional guidance for unique mHealth companies.

Internal Controls in mHealth Accounting

are paramount over financial reporting in mHealth companies. Key considerations include:

- Segregation of Duties - Proper separation of responsibilities over records, transactions,

custody of assets to prevent errors and fraud.

- Access Controls - Restricting system access through layered authentication and

authorization for different user types.

- Data Integrity Checks - Implementing validation controls to ensure accuracy and

- Change Management - Formal processes to track, test and approve deployment of product

updates impacting financial results.

- Inventory Management - Robust governance needed for tracking digital inventories like app

licenses, subscription plans to maintain integrity of deferred revenue balances.

- Vendor Management - Third party risks necessitate controls over selection of strategic

Implementing and testing of these foundational controls provide assurance over financial

information and reduce compliance violations in the dynamic mHealth domain.

As mobile health continues its rapid adoption worldwide, job opportunities are growing

significantly for accounting and finance professionals with expertise in this emerging sector.

Some potential career paths include:

- mHealth Startup CFO/Controller - Oversee all financial operations, fundraising and

- FinTech Analyst - Evaluate new healthcare technology investments, m&a deals from a

financial lens at venture capital, private equity firms.

wearables with HIPAA, FDA, various jurisdictional regulations.

- Tax Manager - Advise digital health companies on optimum tax structuring, manage tax

filings and audits leveraging technology incentives.

- Financial Systems Consultant - Implement ERP, billing solutions tailored for unique needs

of mHealth like subscription-based models.

Accounting skills combined with specialized knowledge of healthcare technologies deliver

qualifications for the digital health finance domain.

Conclusion

In summary, the emerging field of mobile health is disrupting traditional healthcare delivery

and unlocking new opportunities for financial professionals to play important roles. While

core accounting and reporting principles still apply, mHealth introduces novel considerations

accelerates, understanding financial implications will be paramount for stakeholders across