United States

FASB updates the definition of "collections"


The Master Glossary of the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) currently defines “collections” 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 proceeds of items that are sold to be used to acquire other items for collections.

The FASB recently issued Accounting Standards Update (ASU) 2019-03, Not-for-Profit Entities (Topic 958): Updating the Definition of Collections, which modifies the third criterion in this definition to allow 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. This modification will eliminate the diversity in practice between the application of the definition in the ASC compared with the definition many entities use for accreditation purposes. The ASU also requires a collection-holding entity to disclose its policy for the use of proceeds from when collection items are deaccessioned (i.e., removed from a collection). If a collection-holding entity has a policy that allows proceeds from deaccessioned collection items to be used for direct care, it should disclose its definition of direct care.

ASU 2019-03 is effective for annual financial statements issued for fiscal years beginning after December 15, 2019, and for interim periods within fiscal years beginning after December 15, 2020. Early application is permitted. The amendments should be applied on a prospective basis.