Museums to Receive Clarity on Accounting for Collections


By Kristie Hamilton

The Financial Accounting Standards Board (FASB) will soon release for public comment a proposal revising its guidance on accounting for historical collections. The proposal attempts to align the FASB guidance with the requirements from the AAM, formerly known as the American Alliance of Museums. FASB’s proposed revision would broaden U.S. GAAP’s definition of a “collection,” and therefore eliminate the diversity in practice regarding accounting for collections.

Currently, the FASB definition of a “collection” is narrowly defined to only include pieces that meet the following conditions: held for public exhibition, education, or research for continuance of public service rather than financial gain; protected, unencumbered, cared for, and preserved.

In addition, “collection” items, according to current FASB guidance, are subject to a policy that requires the proceeds from the sale of a collection to be used to acquire new collections. However, the definition espoused in the code of ethics of the AAM, which is the accrediting organization for U.S. museums, differs on that point.

The AAM allows for the proceeds of the sale of collections to not only purchase new collections, but also for the proceeds to be used in direct care of collection pieces. This allows for museum curators to utilize these proceeds to better care for their continuously aging existing collections, such as centuries-old art or prehistoric fossils, all while keeping an eye open for their next line of exhibits.

Without the aforementioned changes, external auditors may question accounting of collections even when organizations are following the code of ethics of the AAM. The proposal is expected to be released for comment within the upcoming months. Stay tuned.

For more information on the FASB’s meeting and discussion visit the Meeting Minutes page at www.FASB.org.

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