Accounting and Reporting for Not-for-Profit Organizations

Case Study 8

Collections

Learning objectives

• Identify the factors to consider in defining the collection for a museum and to apply alternative accounting treatments.
• Determine the pros and cons of recording collections.
• Identify the difficulties in identifying and valuing collections.
• Identify when collection items must be depreciated.

Background

Prior to Accounting Standards Update No. 2019-03, Not-for-Profit Entities (Topic 958): Updating the Definition of Collections, FASB Accounting Standards Codification^® (ASC)’s master glossary defines collections as

“Works of art, historical treasures, or similar assets that meet all of the following criteria: (a) They are held for public exhibition, education, or research in furtherance of public service rather than financial gain, (b) They are protected, kept unencumbered, cared for, and preserved, and (c) They are subject to an organizational policy that requires the proceeds of items that are sold to be used to acquire other items for collections.”

However, ASU No. 2019-03 updates the definition to state the following:

“Works of art, historical treasures, or similar assets that meet all of the following criteria:

1. They are held for public exhibition, education, or research in furtherance of public service rather than financial gain.
2. They are protected, kept unencumbered, cared for, and preserved.
3. They are subject to an organizational policy that requires the use of proceeds from items that are sold to be for the acquisitions ...