United States

Definition of "direct care" of collection items


Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) 2019-03, Not-for-Profit Entities (Topic 958): Updating the Definition of Collections, modified one of the criterion in the definition of “collections,” allowing the proceeds from sales of collection items to be used to support the direct care of existing collections, in addition to the acquisition of other items for collections. Because the term “direct care” is not defined in the FASB Accounting Standards Codification, the American Institute of Certified Public Accountants recently issued Q&A 6140.27, “Definition of Direct Care of Collection Items.” Per this guidance, when determining which costs are considered “direct care” of collection items, important characteristics to consider include, but are not limited to, whether those costs:

  • Enhance the life, usefulness or quality of an entity’s collection
  • Provide a benefit to the collections (and not the entity as a whole or other areas of the entity beyond the collections)
  • Exclude expenditures that are regular and ongoing in nature, such as expenditures for routine maintenance of the collection

ASU 2019-03 is effective for financial statements issued for fiscal years beginning after December 15, 2019. Early application of the amendments is permitted. Amendments made in the adoption of ASU 2019-03 should be applied on a prospective basis.