Accounting for Collections and Works of Art, Historical Treasures, or Similar Assets

by Anthony St. George, Senior Associate

Posted on April 10, 2015

We all know of the common types of assets that are typically seen on balance sheets of not-for-profit organizations. The most common are cash, receivables, vehicles, furniture, and equipment. However, there are some types of assets that NPOs can have which include historical treasures or collections of art that have been acquired by the NPO. In order to properly account for these types of assets, the NPO must first understand how a collection if defined by FASB.

Under FASB ASC glossary, a collection is a work of art, historical treasure or similar asset that meets these three criteria:

• They are held for public exhibition, education, or research in furtherance of public service rather than financial gain
• They are protected, kept unencumbered, cared for, and preserved
• 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

If an asset meets the criteria stated above, it is time to determine how to account for it. FASB provides three options for such assets: (a) capitalization of all collection items, (b) capitalization of all collection items on a prospective basis, or (c) no capitalization.

In order to capitalize a collection, the NPO must have a policy in place that allows for such treatment. Contributed collections should be recorded in the period they are acquired and should be recorded at cost. Once the collection is capitalized, the NPO must record depreciation. The NPO should take into account additional factors in determining the useful life of a collection. Many works of art are open to pollutants and other air borne items that may cause damage to the asset. No matter how your organization accounts for these collections, it is important to have the proper policies in place to ensure proper reporting.