skip to main content
X

Industries

Not-For-Profit & Higher Education

Our decades of experience serving not-for-profit and educational organizations of all structures, sizes, and complexities helps us provide you with accounting, advisory, audit, and tax services you need to sustain and grow your organization and maintain your tax-exempt status. Find out how.

ACCOUNTING FOR COLLECTIONS

ACCOUNTING FOR COLLECTIONS

Generally speaking, collections are a set of works or artifacts that are held for public exhibition, education, or research. We usually associate the care of a collection with a nonprofit organization such as a museum, library, or historical site, but for-profit business entities may also maintain collections.

Generally accepted accounting principles (GAAP) provides three different options for the accounting of collections. 1. the capitalization of the collection 2. the capitalization of the collection on a prospective basis (items acquired after a certain date) or 3. no capitalization of the collection. To forgo the capitalization of a collection is typically the standard practice among most American Alliance of Museums (AAM) members.

As collection items are not capitalized, there needs to be clear controls and practices for deaccessioning (removal) of items from the collection.

Until the adoption of ASU No. 2019-03 in March of 2019, Financial Accounting Standards Board (FASB) and AAM were not quite in alignment with their guidance on deaccessioning. According to AAM’s Code of Ethics for Museums, when disposing of a collection item, proceeds are to be used for further acquisitions or direct care of the collection.

Previously, accounting guidance centered around the reinvestment of sale proceeds towards the acquisition of other collection items, and did not address the use of funds toward the maintenance of the collection- a rather significant inconsistency with AMM practices.

ASU No. 2019-03 Not-for-Profit Entities (Topic 958): Updating the Definition of Collections attends to the importance of investing in the care and preservation of the collection by modifying GAAP’s definition of collections. The new definition now includes language to address the use of proceeds for the maintenance of the collection.

The full definition of collections now reads:

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

a. They are held for public exhibition, education or research in furtherance of public services rather than financial gain.
b. They are protected, kept unencumbered, cared for and preserved.
c. They are subject to an organizational policy that requires the use of proceeds from items that are sold to be for the acquisition of new collection items, the direct care of existing collections or both.

Collections generally are held by museums; botanical gardens; libraries; aquariums; arboretums; historical sites; planetariums; zoos; art galleries; nature, science, and technology centers; and similar educational, research, and public services organizations that have those divisions; however, the definition is not limited to those entities nor does it apply to all items held by those entities.

ASU No. 2019-03 also addresses an additional disclosure in the financial statements regarding deaccessioning practices. Organizations are now required to disclose organizational policy for the use of proceeds from deaccessioned collection items, including whether those proceeds can be used for new acquisitions, the direct care of existing collections or both. If proceeds can be used for the direct care of the collection, the organization’s definition of direct care must also be defined.

The standard took effect for annual financial statements issued for fiscal years beginning after December 15, 2019. Amendments should be applied on a prospective basis.

Not-For-Profit & Higher Education insights

News| November 01, 2019

UHY MIDDLE MARKET SURVEY

Read More

Publications| April 01, 2018

Not-For-Profit Insider 12.1

Read More

Hide Firm Disclaimer

©2020 UHY LLP. ALL RIGHTS RESERVED.

UHY LLP is a licensed independent CPA firm that performs attest services in an alternative practice structure with UHY Advisors, Inc. and its subsidiary entities. UHY Advisors, Inc. provides tax and business consulting services through wholly owned subsidiary entities that operate under the name of "UHY Advisors." UHY Advisors, Inc. and its subsidiary entities are not licensed CPA firms. UHY LLP and UHY Advisors, Inc. are U.S. members of Urbach Hacker Young International Limited, a UK company, and form part of the international UHY network of legally independent accounting and consulting firms. "UHY" is the brand name for the UHY international network. Any services described herein are provided by UHY LLP and/or UHY Advisors (as the case may be) and not by UHY or any other member firm of UHY. Neither UHY nor any member of UHY has any liability for services provided by other members.

On this website, (i) the term "our firm", "we" and terms of similar import, denote the alternative practice structure conducted by UHY LLP and UHY Advisors, Inc. and its subsidiary entities, and (ii) the term "UHYI" denotes the UHY international network, in each case as more fully described in the preceding paragraph.