FASB Proposes Accounting Standard Update
Proposed Standard Addresses Diversity in Accounting Practice that Exists Between the Application of the Definition of Collections
On June 26, 2018, the Financial Accounting Standards Board (FASB) issued a proposed Accounting Standard Update (ASU) intended to realign the definition and accounting guidance for collections in the Master Glossary of the FASB Accounting Standard Codification with the definition in the American Alliance of Museums’ (AAM) Code of Ethics for Museums. Stakeholders are asked to review and comment on the proposed ASU by August 10, 2018.
The proposed ASU modifies one of the three conditions to not recognize contributions of works of art, historical treasures, and similar assets by adding the ability to use the proceeds to be used to support the direct care of existing collections, in addition to the current Generally Accepted Accounting Principals (GAAP) condition, which states that proceeds from the sales of the collection items are to be used to acquire other items for collections.
The proposed ASU, which includes aligning the definition and permitting proceeds to be used for the care of existing collections, will
- help eliminate the diversity in practice between the application of the definition in GAAP compared with the definition that many entities use for operational and accreditation purposes,
- better align with many organizations’ missions to maintain their collection,
- and, be consistent with the conclusions in Statement of Financial Accounting Standards No. 116 about the care and preservation of the collections as the basis for permitting entities to not recognize contributed collections.
The proposed standard would be effective upon issuance and would be applied on a prospective basis, although retrospective application would be permitted.