FASB updates definition of ‘collections’ for nonprofits
The Financial Accounting Standards Board issued an accounting standards update Thursday for nonprofits, modifying the definition of the term “collections” to align it with the American Alliance of Museums’ Code of Ethics' definition of the art, historical items and other assets such organization may hold.
The definition for “collections” used in the museum code was also used by FASB in a 1993 accounting standard for contributions received and contributions made. But it has since been revised by the American Alliance of Museums, so FASB is now revising its own definition. FASB noted that accounting for collections is mainly an issue for certain kinds of nonprofit entities such as museums, libraries, art galleries, botanical gardens, aquariums, arboretums, historic sites, planetariums, zoos, as well as nature, science and technology centers, and similar educational, research and public service organizations.
In the same accounting standards update, FASB also made a technical correction in Topic 360, "Property, Plant, and Equipment," to clarify that the accounting and disclosure guidance for collections in Subtopic 958-360, "Not-for-Profit Entities—Property, Plant, and Equipment," applies to business entities in addition to nonprofits.
Under the revised definition, "collections" are defined as works of art, historical treasures or similar assets that meet all of the following 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 use of proceeds from items that are sold to be for the acquisitions of new collection items, the direct care of existing collections, or both.