FASB modifies definition of ‘collections’
It's primarily an issue for not-for-profits.
A new FASB standard aligns the board's definition of "collections" with the definition used in the American Alliance of Museums' Code of Ethics for Museums.
Accounting Standards Update No. 2019-03, Not-for-Profit Entities (Topic 958): Updating the Definition of Collections, applies to all entities, including business entities, that maintain collections. But FASB states that accounting for collections is primarily an issue for certain not-for-profits.
Under the new standard, collections are defined in FASB's Master Glossary 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.
Permitting proceeds to be used for the care of existing collections is consistent with the basis for conclusions in FASB Statement No. 116 about the care and preservation of collections.
The standard also requires a collection-holding entity to disclose its policy for the use of proceeds from when collection items are removed from a collection.
The standard takes effect for annual financial statements issued for fiscal years beginning after Dec. 15, 2019, and for interim periods within fiscal years beginning after Dec. 15, 2020. Early application is permitted, and the amendments should be applied on a prospective basis.