heritage assets 1
TRANSCRIPT
ACCOUNTING STANDARDS BOARD JANUARY 2006 DISCUSSION PAPER
ACCOUNTING
STANDARDS
BOARD
HERITAGE ASSETS:
CAN ACCOUNTING DO BETTER?
For ease of handling, we prefer comments to be sent by e-mail (in Word format), to:
Comments may also be sent in hard copy form to:
Duncan Russell
ACCOUNTING STANDARDS BOARD
5th Floor Aldwych House
71-91 Aldwych
London WC2B 4HN
Comments should reach us by 31 May 2006.
All replies will be regarded as on the public record unless confidentiality is requested by the commentator. If
you are sending a confidential response by e-mail, please include the word 'confidential' in the subject line of
your e-mail.
Cover image: The Rosetta Stone. Copyright The Trustees of The British Museum.
For the convenience of respondents in compiling their responses, the text of the 'Questions for respondents'
in the Preface can be downloaded (in Word format) from the relevant project page in the Current Projects
section of the ASB website (www.frc.org.uk/asb)
C O N T E N T S
Page
Preface 3
Summary of proposals 9
Section 1: What are heritage assets?Heritage assets meet the definition of an asset 13
Inalienability 14Examples of heritage assets 15A definition for heritage assets 16
Existing definitions 16Proposed definition 17
Section 2: What should accounting try to do?Financial information should be relevant and reliable 19Financial information should be comparable 20Financial information should be understandable 21Non-financial information is also useful 21Conclusion 22
Section 3: Approaches to accounting for heritage assetsThe existing UK approach – capitalise recent acquisitions at cost 23A full capitalisation approach 25
Historical cost 26Current value 26Notional value 27
A non-capitalisation approach 27Acquisitions and disposals 27
Proposals 28
Section 4: Some practical considerationsCapitalisation approach 30
Practical issues 30Practicability of the capitalisation approach 33Valuation of heritage assets: some practical difficulties 33
Non-capitalisation approach 34Statement of change in recognised net assets 34Reporting related transactions 35
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First time adoption of proposed accounting treatments 36Capitalisation approach 36Non-capitalisation approach 36
Conclusion 36
Section 5: Disclosure requirementsExisting disclosure requirements 37Proposals for disclosures 38
The nature and scale of heritage assets held 38Accounting policies 39Preservation and management policy 39Acquisitions and disposals 39Funding sources for acquisitions 40Five year financial summary of activity 40Groups of heritage assets 41Other useful information 41
Illustrative examples of disclosures 42Illustrative disclosures under the capitalisation approach 42The Vintage Car Museum 42
Illustrative disclosures under the non-capitalisation approach 46The Barsetshire Museum 46The Ancient Monument Museum 53
Section 6: Historic assets used by the entity itself 55
Section 7: Corporate art 59
Appendix 1: Definitions of heritage assets used in the UKand other jurisdictions 60
Appendix 2: Current reporting requirements in the UKand other jurisdictions 68
Appendix 3: Statement of change in recognised net assets 77
Appendix 4: Reference material 83
Accounting Standards Board january 2006 discussion paper
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P R E F A C E
Introduction
1 In 1799, a company of French soldiers was demolishing awall near the Egyptian village of Rashid to clear the way foran extension to a fort, when it discovered a slab of greygranite. This was the Rosetta Stone, and its inscriptionsprovided the breakthrough for the decipherment ofEgyptian hieroglyphs. In 1801 the stone was acquired bythe British; the following year it was deposited in the BritishMuseum in London where it has remained ever since1.
2 The Rosetta Stone exemplifies, perhaps in extreme form,the challenges that are faced in the financial reporting ofheritage assets. The stone is incomparable: there is no othersimilar asset. As a result, its market value is imponderable: itis, quite literally, priceless. It was acquired at little or nodirect cost: even if it had been purchased, it is unlikely thatthe cost would have any relevance in financial reporting twocenturies later.
3 The stone is one of over 100,000 objects held by the BritishMuseum in its Egyptian collections. The Egyptiandepartment is one of the Museum’s eight departments2.There are some 2,500 museums and galleries in GreatBritain3 and while few have the range and diversity ofobjects held by the British Museum, the problems they facein accounting for heritage assets are similar in kind, if not inscale.
4 Heritage assets are assets with historic, artistic, scientific,technological, geophysical or environmental qualities thatare held and maintained principally for their contribution toknowledge and culture and this purpose is central to theobjectives of the entity holding them. As well as museumcollections such as those of art, antiquities and books theterm ‘heritage assets’ includes assets such as landscape andcoastline, historic buildings and archaeological sites.
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Preface
Why the Board is issuing the Discussion Paper now
5 Financial Reporting Standard (FRS) 15 ‘Tangible fixedassets’$ requires all tangible fixed assets to be capitalised inthe balance sheet; in principle this includes heritage assets.The Statement of Recommended Practice{ for Charitiesissued in October 2000 reflected the requirements ofFRS 15 but continued to allow heritage assets acquired inprevious periods to be exempted from capitalisation on cost-benefit grounds. However, recent additions of heritageassets, where adequate purchase information is availablewithout significant additional cost, are required to becapitalised. Similar requirements apply to centralgovernment entities.
6 A number of entities in the museum and galleries sector doreport values for their total holding of heritage assets in theirprimary financial statements.
7 However, many entities only began to capitalise heritageassets acquired in 2001 and later years. This gives rise to anumber of problems. The accounting treatment isdetermined with reference to when a heritage asset wasacquired, rather than its inherent features and so verydifferent accounting treatments may be applied to similarassets: the balance sheet value will reflect an item acquired in2004, but not an asset acquired in 1994. Perhaps of mostconcern is that the balance sheets of museums and galleriesdo not include their most significant assets. The volume ofacquisitions by museums and galleries is often quite smalland only a fraction of heritage assets held by these entities isreflected in the balance sheet even after many years.Capitalisation of acquisitions may give rise to significant
$
FRS 15 was issued in February 1999 and became effective for accounting periods ending on or after 23
March 2000.{ SORPs are recommendations on accounting practices for specialised sectors in the UK issued by sectoral
bodies recognised by the ASB.
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amounts in the balance sheet yet these are unlikely to berepresentative of the total value of heritage assets held.
8 Some entities aim to compensate for this by providingsupplementary disclosures although the quality of these isuneven, with significant differences in the informationprovided by different entities, which impairs its usefulness.
9 The Financial Reporting Advisory Board$ (FRAB) hasreported its concerns over the existing accounting treatmentapplied by charities and public sector bodies including thenational museums and galleries, citing the problems notedabove. The FRAB recommended that application of theapproach in the charity and public sectors should bemonitored carefully and asked the ASB to review itsimpact once accounts had been prepared under the newrequirements4.
10 It is therefore appropriate to consult on issues concerningthe current accounting and reporting requirements forheritage assets in the UK, to determine whether a change tothese requirements is desirable and if so, to developalternative approaches.
Main features of the Discussion Paper
11 The proposals set out in this Discussion Paper have beendeveloped taking as the starting point the guidance set out inthe Board’s ‘Statement of Principles for financialReporting’{, and the proposals set out in the ExposureDraft for its proposed interpretation for public-benefitentities{. It is clear that the best financial informationreported by entities that hold heritage assets is secured where
$
The FRAB is an independent statutory body which advises the Treasury and devolved administrations in
the UK on financial reporting principles and standards applicable to government departments, executive
agencies, executive non-departmental public bodies, trading funds and health bodies.{ Statement of Principles for Financial Reporting. Accounting Standards Board, December 1999.{ Statement of Principles for Financial Reporting – proposed interpretation for public-benefit entities. ASB
Exposure Draft, August 2005.
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Preface
all heritage assets are reported as assets, at values that provideuseful and relevant information at the balance sheet date.
12 It is also clear that these principles must be implementedwith due regard to the practical difficulties of preparingmeaningful financial statements for entities that hold heritageassets. The proposals set out in this Discussion Paper areintended to be practical for entities responsible for thecustody of heritage assets.
13 The objective of the Discussion Paper’s proposals is toimprove the quality of financial reporting of heritage assets.Whilst it is clear that the best financial reporting requiresheritage assets to be reported as assets at current value, it issimply not practicable for many entities to implement thispolicy. Current accounting standards attempt to resolve thisissue by requiring only recently acquired heritage assets to bereported as such: but this is at the cost of internal consistencywithin the financial statements of a single entity. TheDiscussion Paper proposes that an entity should adopt apolicy of recognising heritage assets where it is reasonablypracticable but that, where it is clear that practicalconsiderations prevent this a ‘non-capitalisation’ approachshould be adopted. Specifically, a capitalisation approachis to be required where it is practicable to obtainvaluations which, when supplemented withappropriate disclosures, provide useful and relevantinformation sufficient to assist in an assessment of thevalue of heritage assets held by an entity. Where thiscannot be achieved, entities would be required to providerelevant disclosures (including the reasons why valuation isnot practicable) and consistently apply a policy of reportingtransactions in heritage assets in a way that does not distortthe reported financial performance.
14 Museums and galleries that currently recognise and capitaliseheritage assets in the balance sheet at valuation wouldcontinue to do so. Those that do not will need to considerwhether it is practicable for them to do so in light of the newrequirements.
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15 A summary of the proposals is set out on pages 9 to 12 of theDiscussion Paper.
Questions for respondents
16 The Board is requesting comments by 31 May 2006. TheBoard would welcome responses not only from its UK andIrish constituents, but also from those based in otherjurisdictions facing similar issues in the financial reporting ofheritage assets.
17 Comments are invited on any aspect of the DiscussionPaper, but would be particularly welcome on the followingissues:
(a) Do you agree with the definition of heritage assetsproposed for financial reporting purposes? If not, whatdefinition would you propose? (paragraph 1.16)
(b) The Discussion Paper proposes that where heritage assetsare reported in the balance sheet this should be at acurrent value rather than at historical cost as thisprovides more useful and relevant information. Doyou agree? If not, please give reasons. (paragraph 3.16)
(c) The objective of the proposals is to improve the qualityof financial reporting of heritage assets. Do you agreethat, to meet this objective, it is impractical to require allentities to adopt a capitalisation approach for thefinancial reporting of heritage assets? (paragraph 3.18)
(d) Do you consider the proposals in paragraphs 4.8 and 4.9will encourage the adoption of a capitalisation approachin appropriate cases? If not, what modifications toexisting reporting requirements would you propose?
(e) Where it is clear that practical considerations prevent anentity adopting a policy of recognising heritage assets anon-capitalisation approach should be adopted. Do youagree that, in reaching this decision, an entity should
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Preface
have regard to whether it can obtain—at a reasonablecost—reliable valuations on an ongoing basis for themajority, by value, of heritage assets held and that thisshould be explained clearly in the notes to the accounts?If you do not agree, how should an entity support itsdecision to adopt a non-capitalisation approach?(paragraphs 4.12 and 4.13)
(f) Under a non-capitalisation approach, it is proposed thatacquisitions and disposals of heritage assets should bepresented outside of the income and expenditureaccount in a statement of change in recognised netassets. Do you support this proposal? If not, how shouldthese transactions be reported? (paragraphs 4.15 and 4.16)
(g) Do you consider that it is appropriate to report othertransactions related specifically to heritage assets—suchas donations, grants for their acquisition and restorationcosts—in a statement of change in recognised net assets?If not, how should these transactions be reported?(paragraph 4.18 and Appendix 3)
(h) Do you agree with the proposed disclosure requirementsfor heritage assets? Are there other disclosures that arepracticable and would provide useful information?(paragraphs 5.6 to 5.17)
(i) It is proposed that, for financial reporting purposes,historic assets used by the entity itself and corporate artare not heritage assets. Is it appropriate at this stage toclarify the accounting treatment of these assets? If so, doyou agree with the proposals in Sections 6 and 7 of theDiscussion Paper?
18 The Discussion Paper has been prepared by the Board’sCommittee on Accounting for Public-benefit Entities incollaboration with the International Public SectorAccounting Standards Board. The input from CAPE andmembers, technical advisors and staff of IPSASB is gratefullyacknowledged.
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Accounting Standards Board january 2006 discussion paper
SUMMARY OF PROPOSALS
1 The Discussion Paper proposes to replace the existingmixed capitalisation accounting treatment for heritageassets with approaches that are intended to be practical toapply by entities responsible for the custody of heritageassets and to improve the quality of their financialreporting. The proposals take as the starting pointguidance set out in the Board’s ‘Statement of Principlesfor Financial Reporting’ and the proposals set out in theExposure Draft of the Statement’s interpretation forpublic-benefit entities.
Objective
2 The objective of the proposals is to improve the qualityof financial reporting of heritage assets. Heritage assetsshould be reported as assets at values that provide usefuland relevant information at the balance sheet date. Acapitalisation approach is to be required where it ispracticable to obtain valuations which, whensupplemented with appropriate disclosures, provideuseful and relevant information sufficient to assist in anassessment of the value of heritage assets held by anentity. Where this cannot be achieved, an entity wouldbe required to provide relevant disclosures (including thereasons why valuation is not practicable) and consistentlyapply a policy of reporting transactions in heritage assetsin a way that does not distort the reported financialperformance.
Capitalisation approach
3 Where an entity can obtain at reasonable cost reliablecurrent values for the majority, by value, of heritageassets held these values should be reported in the balancesheet. To support this approach, some modifications toexisting accounting requirements are proposed forheritage assets such as wider use of internal valuations
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Summary of proposals
SUMMARY OF PROPOSALS continued
and indices based on reference guides or recenttransactions and extended intervals between revaluations.
4 Consistent with the requirement to provide useful andrelevant information at the balance sheet date,measurement at a notional value would not bepermitted. And historical cost would not be permitted(except where it provides a good proxy for currentvalue) since many heritage assets were acquired sometime in the past so that historical cost becomesincreasingly less relevant. Information on historical costmay have been lost over time or will not be availablewhere heritage assets were acquired through donation.
Non-capitalisation approach
5 However, if an entity can demonstrate that it cannotobtain reliable values at reasonable cost for the majority,by value, of its heritage assets then consistent with theobjective to adopt a consistent and transparentaccounting treatment, values should not be reported inthe balance sheet. Additional disclosures should be givento provide useful and relevant information about theheritage assets held by an entity.
6 The acquisition and disposal of heritage assets should beclearly reported and in a way that does not distortfinancial performance. To achieve this, a separatestatement is proposed to reconcile total gains and losseswith the change in recognised net assets taking accountof heritage asset acquisitions and disposals.
7 The Discussion Paper also considers, tentatively,whether related transactions such as donations andgrants to acquire heritage assets and the costs of theirmajor restoration should also be reported separately insuch a statement.
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SUMMARY OF PROPOSALS continued
Disclosures
8 In the notes to the financial statements it is proposed thatentities disclose which accounting treatment has beenfollowed with supporting reasons; details of majoracquisitions in the period together with sources offunding; and, a five year financial summary of activity(including acquisitions and disposals of heritage assets). Itis also proposed that disclosures should be made aboutthe nature and scale of heritage assets held and policiesfor their preservation. Entities may wish to providedetailed information for some of these disclosures inaccompanying information such as the Operating andFinancial Review or Trustees’ Annual Report and it maybe appropriate to refer in the notes to the financialstatements to this more detailed accompanyinginformation.
Definition
9 Heritage assets meet the definition of an asset as theyembody service potential as well as or instead of cashflows. The following definition is proposed to clarify thescope of the proposals in the Discussion Paper:
‘‘An asset with historic, artistic, scientific, technological,geophysical or environmental qualities that is held andmaintained principally for its contribution to knowledge andculture and this purpose is central to the objectives of the entityholding it.’’
10 It follows that, for example, an historic building used bythe entity itself would not meet the definition as it is heldfor purposes other than a contribution to knowledge andculture. And works of art held by a profit-orientedcompany would fall outside of the definition as thecompany’s primary objective is to make a profit rather
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Summary of proposals
SUMMARY OF PROPOSALS continued
than a contribution to knowledge and culture. Theseassets should be accounted for under existing reportingrequirements for tangible fixed assets.
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S E C T I O N 1 :W H A T A R E H E R I T A G E A S S E T S ?
1.1 This section examines whether heritage assets are indeedassets from an accounting perspective and so should, at leastconceptually, be reported in the balance sheet. It thenexamines the specific issue of assets that are ‘inalienable’.Finally, it proposes a definition for heritage assets.
Heritage assets meet the definition of an asset
1.2 The ASB’s Statement of Principles defines assets as ‘‘rights orother access to future economic benefits controlled by anentity as a result of past transactions or events’’5. TheStatement notes that future economic benefits usuallyeventually result in net cash inflows to the entity. Manyheritage assets held by entities do not provide cash inflowsfor the entity and it is argued by some that for this reasonthey should not be regarded as assets. This issue isparticularly acute for assets that are ‘inalienable’ (seeparagraphs 1.5 to 1.8).
1.3 Yet heritage assets are central to the purpose of an entitysuch as a museum or gallery: without them the entity couldnot function. An artefact held by a museum might berealisable for cash, it might generate income indirectlythrough admission charges or the exploitation ofreproduction rights. However, and in most cases muchmore importantly, the museum needs the artefact tofunction as a museum. The artefact has utility: it can bedisplayed to provide an educational or cultural experience tothe public or it can be preserved for future display or foracademic or scientific research. The future economicbenefits associated with the artefact are primarily in theform of its service potential rather than cash flows6.Therefore, a heritage asset meets the definition of an assetnoted in paragraph 1.2 above.
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Section 1: What are heritage assets?
1.4 Accounting standards-setting bodies in other jurisdictionswhich have considered this issue also conclude, in general,that heritage assets meet the definition of an asset.
Inalienability
1.5 Heritage assets are often described as ‘inalienable’ ie theentity cannot dispose of them without external consent.Such a restriction may, for example, be imposed by trustlaw, arise from the charity’s governing documents or insome cases by statute. The key feature of inalienability is thatit prevents an asset being readily realisable. Some argue thatinalienable assets held in trust are not assets of the entity,equating the inability to sell such items with forgoing theeconomic benefit inherent in them. But assets that areinalienable may well have utility to the entity and therefore,as noted in paragraph 1.3 above, meet the definition of anasset.
1.6 A charitable entity might acquire an office building, throughdonation, which the donor has specified is for the charity’sown use and therefore cannot be sold. In substance thecharity has acquired the rights to future economic benefits(embodied as the service potential of officeaccommodation). Few would dispute that such a buildingshould be reported as an asset even if it is inalienable. Thisreasoning should apply similarly to heritage assets.
1.7 Inalienability is not a robust concept—it is possible that adonor’s wishes may be revoked and even statutoryrestrictions are not immutable from amendment orrevocation by Parliament. Some assets are so central to thepurpose of an entity it is inconceivable they would ever besold, so in substance they are inalienable, yet this should notprevent their recognition in the balance sheet.
1.8 Inalienability should not therefore be regarded as an absolutebarrier to the recognition of heritage assets7. Other factorssuch as their utility, their contribution to the entity’sobjectives and the reliability of their measurement would
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appear to be significant factors in determining theaccounting treatment. However the restrictions over theiruse means that it is appropriate to distinguish inalienableassets from other assets in the balance sheet.
Examples of heritage assets
1.9 The following examples illustrate the range of items typicallyregarded as heritage assets:
(a) Works of art, antiquities or other exhibits such asbiological and mineral specimens or technologicalartefacts, typically held in collections by museums andgalleries. Their heritage value may arise from theirprovenance or their particular association with historicalor cultural events. Some of these objects may bedisplayed to the public, whilst access to others may berestricted to those who need it for research purposes;
(b) Collections of rare books, manuscripts and otherreference material held by libraries and preserved fortheir historical and cultural value as a reference source;
(c) Historic monuments such as standing stones and burialmounds;
(d) Historic buildings reflecting unique architecturalcharacteristics or which have significant historicalassociations. They may not necessarily be old; somemodern buildings are regarded as worthy ofpreservation; and
(e) Elements of the natural landscape and coastline.Typically these might include distinct geological andphysiographical formations and discrete geographicalareas encompassing the habitats of threatened species ofanimals or plants. They are preserved for scientific,cultural or environmental reasons.
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Section 1: What are heritage assets?
1.10 In considering these examples, a common definingcharacteristic of heritage assets is that they are held andmaintained for public-benefit purposes such as thecontribution to knowledge and culture.
A definition for heritage assets
Existing definitions
1.11 UK accounting standards do not provide a specific definitionof heritage assets. FRS 15 ‘Tangible fixed assets’ refers toinalienable, historic and similar assets of particular historic,scientific or artistic importance. In the UK charity sector,the requirements of FRS 15 are supplemented by aStatement of Recommended Practice, the CharitiesSORP$ which defines heritage assets as:
‘‘...assets of historical, artistic or scientific importance thatare held to advance preservation, conservation andeducational objectives of charities and through publicaccess contribute to the national culture and educationeither at a national or local level. Such assets are central tothe achievement of the purposes of such charities andinclude the land, buildings, structures, collections,exhibits or artefacts that are preserved or conserved andare central to the educational objectives of such charities.’’
1.12 The United Nations Educational Scientific and CulturalOrganisation has developed definitions of ‘cultural heritage’(monuments, groups of buildings and archaeological sites)and ‘natural heritage’ (natural features consisting of physical,biological, geological and physiographical formations andsites). These objects, sites and natural features are ofoutstanding universal value from the point of view ofhistory, art, science, aesthetics, ethnology, anthropology,conservation or natural beauty. These definitions are
$
The Charities SORP 2005 sets out recommendations on accounting practices for charities in the UK. It is
issued by the Charity Commission.
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reflected in a number of jurisdictions’ accounting standards,which are summarised in Appendix 1.
1.13 Many of these pronouncements also reflect characteristicsdisplayed by heritage assets. For example:
(a) they are protected, kept unencumbered, cared for andpreserved;
(b) they are rarely held for their ability to generate cashinflows or sale proceeds, and there may be legal or socialobstacles to using them for such purposes;
(c) they are often irreplaceable and their value may increaseover time even if their physical condition deteriorates;and
(d) it may be difficult to estimate their useful lives, which insome cases could be several hundred years..
1.14 However, while these characteristics are often displayed byheritage assets, they are not unique to them and so cannot beconsidered as defining characteristics.
Proposed definition
1.15 A heritage asset meets the definition of an asset as it canembody service potential as well as or instead of cash flows.Covenants on its use and restrictions on its disposal do not inthemselves determine whether an asset is a heritage assetalthough these factors may impact on how such an asset isreported in the financial statements.
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Section 1: What are heritage assets?
1.16 Given the absence of a formal definition of a heritage assetfrom existing UK accounting standards, and in light of theexamples considered above, the following definition isproposed:
An asset with historic, artistic, scientific, technological,geophysical or environmental qualities that is held andmaintained principally for its contribution to knowledge andculture and this purpose is central to the objectives of the entityholding it.
1.17 As well as museum collections the definition includes assetssuch as landscape and coastline, historic buildings andarchaeological sites.
1.18 Entities may hold assets that might be regarded as heritageassets but the assets do not meet the definition proposedabove. For example, a university may use an historicbuilding to house teaching facilities – this rather thanheritage is the building’s principal purpose. A profit-oriented company may own works of art which it holdsfor decorative purposes but contribution to knowledge andculture is not central to its primary objective which is tomake a profit. The accounting treatments of these examplesare considered in sections 6 and 7 of the Discussion Paper.
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S E C T I O N 2 :W H A T S H O U L D A C C O U N T I N G T R Y T O D O ?
2.1 The ASB’s Statement of Principles states that the objectiveof financial statements is to provide information about thereporting entity’s financial performance and financialposition that is useful to a wide range of users for assessingthe stewardship of the entity’s management and for makingeconomic decisions8. This section draws on the Statement’sconsideration of the qualities of financial information thatmake it useful in order to determine the requirements thatare desirable for the financial reporting of heritage assets.
2.2 In the UK, heritage assets are held by public-benefitentities$. Rather than investors, the defining class of userof the financial statements of public-benefit entities is thefunders and financial supporters9. A financial supporter issomeone such as an individual or ‘friends’ group makingdonations to assist with the purchase of heritage assets. Afunder is someone such as a taxpayer. Financial supportersand indeed funders will be interested in financialinformation that helps them to assess how effectivelymanagement has fulfilled its stewardship role and used theresources at its disposal.
Financial information should be relevant and reliable
2.3 Financial information should be timely and sufficient toinfluence users’ economic decisions and their assessment ofmanagement’s stewardship. The nature and level ofacquisitions and disposals of heritage assets, and associatedmonetary values, particularly if these are linked to specificdonations or grants, are important to determine how the
$
Reporting entities whose primary objective is to provide goods or services for the general public or social
benefit and where any risk capital has been provided with a view to supporting that primary objective rather
than with a view to a financial return to equity shareholders.
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Section 2: What should accounting try to do?
entity has used the resources available to it and assess theextent to which the entity relies on external funding.
2.4 It is concerning that, under current reporting requirements,the balance sheets of many museums and galleries do notcurrently include their most significant assets. In such cases itis unclear how the financial information is sufficient toinfluence users’ economic decisions and their assessment ofmanagement’s stewardship. Therefore, the financialinformation provided should give a complete and faithfulrepresentation of an entity’s holdings of heritage assets. If thisis not the case supplementary disclosures should be given tocomplete the picture. This is considered further inparagraphs 2.10 to 2.12.
Financial information should be comparable
2.5 Information is more useful if it can be compared with similarinformation about the entity for some other period or pointin time. The same accounting treatment should be appliedto heritage assets with similar characteristics from oneaccounting period to the next. The notes to the financialstatements should state clearly the accounting treatmentapplied to heritage asset balances and transactions.
2.6 Information is also more useful if it can be compared withsimilar information about other entities to evaluate theirrelative financial performance and position. For example, itmight be expected that art collections are reported in asimilar way in different galleries’ financial statements.
2.7 But if an entity itself accounts for similar assets in differentways this will limit both internal and external comparabilityand provide less useful information. Therefore consistencywithin an entity should be paramount in financial reportingrequirements. Inconsistent treatment should be theexception and, where it arises, sufficient disclosure shouldbe given to enable the user to understand why and its impacton the financial statements.
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Financial information should be understandable
2.8 Users need to be able to perceive the significance ofinformation provided by financial statements. Whetherfinancial information is understandable will depend on theway in which the effects of transactions and other events areaggregated and classified and the way in which informationis presented. An accounting treatment applied consistently toall relevant transactions will assist understandability.
2.9 Heritage assets and the acquisition and disposal of themshould be clearly distinguished from other assets andtransactions. This presentation might be supplementedwith disclosures to explain particular transactions and events.
Non-financial information is also useful
2.10 Other quantitative and qualitative information about theheritage assets (for example, the number of heritage assetsheld and management’s policies for their display) will beuseful in order to understand how they provide publicbenefit. Presentation of the information should reflect thenature of the heritage assets held and the way they aremanaged, for example, the conservation policy and thedegree to which access to them is permitted.
2.11 Preservation is an important function of entities holdingheritage assets. It therefore seems reasonable for entities toprovide information about their preservation policies. Thismay put into context any expenditure on repairs andmaintenance and explain what commitments the reportingentity has to future maintenance particularly with regard tothe level of annual funding required to meet thesecommitments.
2.12 It may be more appropriate to report non-financialinformation outside of the financial statements in theaccompanying information such as the Operating andFinancial Review or Trustees’ Annual Report.
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Section 2: What should accounting try to do?
Conclusion
2.13 Good financial reporting of heritage assets in generalpurpose financial statements should inform funders andfinancial supporters about the nature and, where available,value of assets held; report on the stewardship of the assets bythe entity; and inform decisions about whether resources arebeing used appropriately. This will require an entity to adopta consistent and transparent accounting treatment. Proposalsconsistent with this requirement are developed in Sections 3to 5 of this Discussion Paper.
Accounting Standards Board january 2006 discussion paper
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S E C T I O N 3 :A P P R O A C H E S T O A C C O U N T I N G F O RH E R I T A G E A S S E T S
3.1 This section reviews three possible accounting approachesfor heritage assets, in the light of the desirable reportingrequirements identified in Section 2. These approaches are:
. The existing ‘mixed’ capitalisation approach;
. A ‘full’ capitalisation approach; and
. A non-capitalisation approach.
The existing UK approach – capitalise recent acquisitionsat cost
3.2 FRS 15 ‘Tangible fixed assets’ requires all tangible fixedassets to be recognised and capitalised: in principle thisincludes heritage assets. However, FRS 15 recognises thatfor some heritage assets the cost of obtaining a reliablevaluation may outweigh the benefit to users, in particular inthe case of assets that had not been capitalised in the past, andsome donated heritage assets.
3.3 A number of entities in the museum and galleries sectorreport amounts for their total holding of heritage assets inthe balance sheet. However, many public-benefit entitieshave only capitalised subsequent acquisitions of heritageassets since the adoption of FRS 15 in 2001.
3.4 This approach appears to have some practical advantages inthat reliable cost information is readily available for recentpurchases and there is no requirement for retrospectivevaluation where cost information might not be available.
3.5 However, it also gives rise to some pervasive problems and itis unclear how readers of the financial statements make senseof the reported information. Specifically:
Section 3: Approaches to accounting for heritage assets
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(a) Inconsistent treatment of similar assets: In effect two verydifferent accounting policies (capitalisation and non-capitalisation) are applied to the same class of asset$. Forexample, an entity may own two similar heritage assets,but one was acquired some time ago and is notrecognised in the balance sheet, whereas the other wasacquired recently and has been capitalised at what iseffectively the current market price. This treatment mayalso have a perverse impact on the performancestatement; if the entity sells one asset it will recognisea very different gain from that recognised on the sale ofthe other.
(b) Subsequent expenditure: Further inconsistencies arise fromthe treatment of subsequent expenditure. Suchexpenditure, for example, to restore an historicbuilding may significantly extend its life, and shouldtypically be capitalised. However, where the underlyingheritage asset has not been capitalised these costs wouldbe expensed.
(c) Incomplete information: A typically low volume ofacquisitions means that, for museums and galleries inparticular, those heritage assets that are capitalised reflectonly a small part of the total held. Over time thecapitalisation of additions may give rise to significantamounts in the balance sheet yet these are still unlikelyto be representative of the total held. Consequently,users will have to look to other sources of information toput these transactions into context.
(d) Impact on reserves: Some charities are concerned thatcapitalisation of recently acquired heritage assets leads to
$
Inconsistent accounting such as this exists elsewhere in financial reporting. Under FRS 10 ‘Goodwill and
intangible assets’, purchased goodwill should be capitalised and classified as an asset on the balance sheet but
internally generated goodwill should not. However, capitalised values for purchased goodwill will be
reviewed for impairment on a regular basis and may be depreciated. This is not usually the case for heritage
assets which have indeterminate lives and are usually not depreciated.
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an increase in reserves and misleads readers of theaccounts, including potential donors, as to the level ofaccessible funds. However, the relative liquidity of theassets should be discernable from their presentation inthe balance sheet and disclosures in the notes to theaccounts.
A ‘full’ capitalisation approach
3.6 In principle, there are the same benefits and advantages inrecognising and valuing heritage assets as there are for othertangible fixed assets: to inform funders and financialsupporters about the value of assets held; to report onstewardship of the assets by the owner entity and to informdecisions about whether resources are being usedappropriately.
3.7 Under a capitalisation approach, heritage assets, includingthose acquired in previous accounting periods, should berecognised and capitalised in the balance sheet. This wouldensure that the accounting policy is applied consistently toall heritage assets held. Such an approach is consistent withthe Statement of Principles which requires the recognitionof an asset if there is sufficient evidence it exists and it can bemeasured at a monetary amount with sufficient certainty10.
3.8 Heritage assets might be reported at historical (transaction)cost or a current value; some jurisdictions permit the use ofnotional values. These bases of measurement have theirrelative merits and disadvantages (see box on page 26 fordiscussion). In considering these it is clear that notionalvalues will not provide useful and relevant information. Thenature of heritage assets means that historical cost is notgenerally an appropriate measurement basis for them and sothe basis of measurement under a capitalisation approachshould be a current value based on market values.
Section 3: Approaches to accounting for heritage assets
25
Historical cost
A heritage asset being measured using the historicalcost basis is recognised at transaction cost. Thisinformation is straightforward to ascertain for recentacquisitions and readily understandable. However,heritage assets tend to have indeterminate lives andconsequently no further accounting adjustment fordepreciation or impairment is made to the initialcarrying value. Also, many heritage assets wereacquired some time in the past; the passage of timeand the subsequent changes in market values—wherethey exist and which can be unpredictable—mean thata reported historical cost is often not a useful guide totheir value. Over time the historical cost will provideinformation that becomes less useful and relevant.
Information on cost may not be available. It may havebeen lost over time or, as is often the case, heritageassets are acquired by donation. In these circumstances,under existing requirements, a current value should bedetermined as the deemed cost11.
Current value
A current value is determined by reference to amarket-based value. Many heritage assets are extremelyvaluable and, from a stewardship perspective, it isdesirable that the balance sheet should reflect this. Insubsequent reporting periods re-measurement takesplace to ensure that assets are reported at an up-to-datecurrent value. This provides relevant informationabout heritage assets at the balance sheet date unlikehistorical cost.
However, there are many practical difficultiesassociated with determining a current value forheritage assets. These are considered further inSection 4.
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Notional value
Some take the view that it is preferable that the balancesheet should report a value however unreliable ratherthan no value, for stewardship purposes. Whilstnotional values may be relatively easy to determine itis questionable whether they provide useful andrelevant information to assist in an assessment of thevalue of heritage assets held. They may indeed bemisleading even if their limitations can be clearlyexplained and it would be preferable instead to reportno value in the balance sheet.
A non-capitalisation approach
3.9 Under a non-capitalisation approach entities would not bepermitted to capitalise heritage assets acquired in the past orduring the current reporting period. This would ensure thatan accounting policy is applied consistently to all heritageassets. This approach would clearly be straightforward toimplement as it avoids practical problems in determiningvalues.
Acquisitions and disposals
3.10 However, in applying a non-capitalisation approach, thetreatment of acquisitions and disposals in the currentreporting period will need to be determined.
3.11 One treatment might be to record the acquisition of aheritage asset as an expense in the income and expenditureaccount. This approach is permitted in a number ofjurisdictions (see Appendix 2). However, this could beseen to misrepresent the substance of the transaction in thatan asset has been acquired and has not been consumed. Thisdistorts the level of reported expenses and does not properlyreflect financial performance. Reporting the full proceedsfrom the disposal of heritage assets as income in theperformance statement is also distorting.
Section 3: Approaches to accounting for heritage assets
27
3.12 An alternative treatment would be to present the acquisitionand disposal of heritage assets separately, outside of theincome and expenditure account, to distinguish clearly thesetransactions from other activities of the entity. This approachis similar to that required by SFAS 116 ‘Accounting forcontributions received and contributions made’$.
3.13 It is proposed that under a non-capitalisation approachacquisitions and disposals of heritage assets should bepresented separately from income and expenditure. Thiswill aid transparency of reporting and, linked to enhanceddisclosures, should provide a clearer picture of heritage assettransactions for the reporting period.
Proposals
3.14 It was concluded in Section 2 that good financial reportingof heritage assets will require an entity to adopt a consistentand transparent accounting treatment. This could beachieved by requiring all heritage assets to be recognised asassets at current value but this is simply not practicable formany entities. Alternatively, this could be achieved byprecluding the recognition of any heritage assets. But thiswould be a retrograde step for those entities which currentlyrecognise their heritage assets, and would reduce the level offinancial information available to financial supporters andfunders. However, it is clear that consistent and transparentaccounting cannot be achieved under the existing mixedcapitalisation approach.
3.15 The existing ‘mixed’ capitalisation approach that hasarisen from the application of FRS 15 shouldtherefore be replaced. The inconsistent treatment ofsimilar heritage assets in an entity’s financial statementsresults in incomplete information that is not readilyunderstandable and does not meet the requirement forgood financial reporting noted above.
$
Issued by the US Financial Accounting Standards Board and summarised in Appendix 2.
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3.16 Heritage assets should be reported as assets at valuesthat provide useful and relevant information at thebalance sheet date. A heritage asset meets the definition ofan asset as it can embody service potential as well as orinstead of cash flows. Valuation should be at a current valuebased on market values. Historical cost will not generallyprovide information that is useful and relevant and notionalvalues will not assist in an assessment of the value of heritageassets held.
3.17 Wherever it is practicable to obtain valuations, theseshould be capitalised in the balance sheet. Whensupplemented with appropriate disclosures, these valuationsshould provide useful and relevant information sufficient toassist in an assessment of the value of heritage assets held byan entity. Information will be sufficient if valuations can beobtained for the majority, by value, of heritage assets heldand any limitations of the valuations are disclosed.
3.18 Where it is not practicable to obtain valuations, anentity should instead adopt a non-capitalisationapproach. Acquisitions and disposals should be reportedseparately from financial performance and additionaldisclosures should be given to provide useful and relevantinformation about the heritage assets held.
3.19 The practicability of obtaining valuations and otherimplementation issues arising from these proposals arediscussed in Section 4. Disclosure requirements areconsidered in Section 5.
Section 3: Approaches to accounting for heritage assets
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S E C T I O N 4 :S O M E P R A C T I C A L C O N S I D E R A T I O N S
4.1 The objective of the proposals set out in Section 3 is toimprove the quality of financial reporting of heritage assetsby requiring an entity to adopt a consistent and transparentaccounting treatment. Heritage assets should be reported asassets at values that provide useful and relevant informationat the balance sheet date. A capitalisation approach istherefore proposed where it is practicable to obtainvaluations which, when supplemented with appropriatedisclosures, provide useful and relevant informationsufficient to assist in an assessment of the value of heritageassets held by an entity. Where this cannot be achieved, anentity should instead adopt a non-capitalisation approach.
4.2 This section considers some practical implications ofapplying these approaches.
Capitalisation approach
4.3 Under this approach, it is proposed that all heritage assets,including those acquired in previous accounting periods, arerecognised and capitalised in the balance sheet at valuation.
4.4 The capitalised values for heritage assets should bemaintained at an up-to-date current value through regularrevaluation. The existing requirements for recognising gainsand losses on revaluation in the Statement of RecognisedGains and Losses would be applied12, although these gainsand losses should be distinguished from changes arising fromthe revaluation of other assets.
Practical issues
4.5 It is proposed that heritage assets should be recognised as aseparate class of tangible fixed asset to aid presentation anddisclosure. For example, if an entity used the Companies Act
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format 1 balance sheet , it might include a heading forheritage assets between ‘fixtures, fittings, tools andequipment’ (B,II,3) and ‘payments on account and assetsin the course of construction’ (B,II,4).
4.6 Heritage assets acquired in previous accounting periods aremeasured at a current market-based value. Acquisitions inthe current accounting period are reported at transactioncost or, where donated, at a current value in order toprovide useful and relevant information at the balance sheetdate.
4.7 Under the existing requirements of FRS 15 ‘Tangible FixedAssets’ property should be professionally revalued every fiveyears supplemented by interim valuations. Certain tangiblefixed assets other than property may instead be valued byreference to active markets or appropriate indices13. It isnoted in FRS 15 that these requirements may not beappropriate for heritage assets and alternative approachesmight be developed.
4.8 Therefore, to support the capitalisation approach andprovide useful and relevant information to assist in anassessment of the value of heritage assets held somemodifications to existing accounting requirements forrevaluation are proposed for heritage assets. For example:
(a) wider use of internal valuations and indices based onreference guides or recent transactions could bepermitted in place of formal revaluations;
(b) the interval between formal revaluations could beextended; and
(c) historical cost may be used where it is a reasonable proxyfor current value.
4.9 Valuation difficulties should not necessarily precludeapplying the capitalisation approach where a pragmatictreatment might still provide useful and relevant information
Section 4: Some practical considerations
31
sufficient to assist in an assessment of the value of heritageassets held by an entity. For example:
(a) where some individual heritage assets cannot be valuedreliably but the majority can, it would be appropriate toexplain the difficulties with valuation for such assets;
(b) the number of heritage assets to be valued should notpreclude adoption of the capitalisation approach if mostof the value of the heritage assets held by an entity restsin a small number of objects; and
(c) it may be practicable to obtain valuations for some butnot all groups or collections of heritage assets so thatmost of the value of the entity’s total holdings of heritageassets is recognised in the balance sheet$.
4.10 A museum might be able to value some groups orcollections of heritage assets that represent only a smallportion of the value of the total. Some consider that thevalues should be reported in the balance sheet. However, itwas noted in paragraph 2.7 that a consistent accountingtreatment should be paramount in financial reportingrequirements. Therefore, where limited valuationinformation is available, it should be disclosed in the notesto the accounts rather than be reported in the balance sheet.
4.11 In many cases heritage assets are held in perpetuity. They arenot ‘consumed’ in the normal sense and with preservation orregular maintenance will have long and useful lives. Forexample, a 2,000 year old Roman statue may well exist foranother 2,000 years. In most cases, therefore, a policy ofnon-deprecation is appropriate.
$
For example, a motor museum may be able to value and therefore capitalise its collection of vintage cars but
not its collection of motoring ephemera.
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Practicability of the capitalisation approach
4.12 It is recognised that there are practical difficulties associatedwith determining a current value for heritage assets—theseare summarised in the box below. A reporting entity mightdetermine that it is not practicable to obtain valuationswhich, even if supplemented with appropriate disclosures,are sufficient to assist in an assessment of the value ofheritage assets it holds. In reaching this decision it shouldhave regard to whether:
. reliable valuations can be obtained for the majority, byvalue, of heritage assets held;
. the cost of obtaining valuations is prohibitive;
. the valuations can be kept up to date.
4.13 However, a reporting entity should explain this decisionclearly in the notes to the accounts. Where it cannot adopt acapitalisation approach a reporting entity should insteadadopt a non-capitalisation approach.
Valuation of heritage assets: some practical difficulties
Incomparable nature: Some heritage assets (such as theRosetta Stone) simply cannot be valued as there are nocomparable assets from which to determine a value.The provenance of a heritage asset (for example, thespear that killed Captain Cook) may determine itscultural (as well as monetary) value which cannot beascertained properly from like-for-like comparisons orfrom its reproduction cost as the heritage provenancecannot be recreated.
Lack of active market: Heritage assets tend to be heldindefinitely and may be rarely sold. Consequently theremay be no market reference from which to identify acurrent value. And where markets do exist they may be
Section 4: Some practical considerations
33
specialised and the volumes of transactions small, sothat prices fluctuate making it impossible to determinemeaningful trends.
Insurance values may not be available or relevant: Theincomparable nature of heritage assets which, beingunique, cannot be replaced also brings into questionthe appropriateness of insurance values. For this reasonmany entities do not generally insure heritage assets,although they may insure against accidental damagewhere items are loaned to another institution.
Large collections to be valued: Museums and galleries mayhold thousands of heritage assets. The sheer volume ofobjects precludes their valuation on cost-benefitgrounds alone. Sampling techniques may have someapplication where large collections of similar objectsare held. However, a museum collection may well notbe homogeneous in nature and the incomparablenature of heritage assets might preclude widerapplication of sample-based valuations.
Non-capitalisation approach
4.14 Under this approach it is proposed that entities are notpermitted to capitalise values for heritage assets acquired inthe past or during the current reporting period. Acquisitionsand disposals of heritage assets in the current reportingperiod should be reported separately outside of the incomeand expenditure account to distinguish them clearly fromthe financial performance of the entity.
Statement of change in recognised net assets
4.15 In order to achieve this it is proposed that a separatestatement – a statement of change in recognised net assets –is developed to present heritage asset transactions. Thestatement would reconcile reported financial performance to
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the movement in recognised net assets by including heritageasset acquisitions and disposals.
4.16 Acquisitions would be reported in aggregate referenced tomore detailed information in the notes to the accounts. Insome circumstances heritage assets may be disposed ofthrough sale and it would be appropriate to report thesedisposal proceeds, separately from other gains, in thestatement as well. For example:
Statement of change in recognised net
assets
£000s £000s
Recognised gains/(losses) for the financial year 1,000)
Heritage asset transactions:
Proceeds from disposal of heritage assets 25
Acquisition of heritage assets (250)
Net heritage asset transactions (225)
Change in recognised net assets 775)
4.17 Charities in the UK already use a single accountingstatement (the Statement of Financial Activity or SOFA)which presents income and expenditure together with otherrecognised gains and losses and reconciles the opening andclosing net asset position. It would seem desirable, inprinciple, to distinguish heritage asset acquisitions anddisposals from other charitable activities and the format ofthe SOFA should be flexible enough to accommodate this.
Reporting related transactions
4.18 In addition to acquisitions and disposals, other transactionsare associated specifically with heritage assets includingdonations of heritage assets, cash donations and grants toacquire heritage assets and the costs of major restoration.Appendix 3 considers whether these transactions might alsobe reported in the statement of change in recognised netassets.
Section 4: Some practical considerations
35
First time adoption of proposed accounting treatments
Capitalisation approach
4.19 It is anticipated that those entities which currently capitalisevalues for their heritage assets would continue to do soproviding the approach is applied consistently to all heritageassets and the assets are capitalised at a current value.
4.20 Where heritage assets are reported at historical cost, and thecapitalisation approach is to be applied, all heritage assets willneed to be remeasured at a current value. This should bepresented as a prior period adjustment in accordance withFRS 3 ‘Reporting financial performance’.
Non-capitalisation approach
4.21 Those entities that determine that it is not practicable toapply a full capitalisation approach consistently to theirheritage assets will adopt the non-capitalisation approach.This may require the restatement of recently capitalisedacquisitions of heritage assets which should be presented asprior period adjustment in accordance with FRS 3.
Conclusion
4.22 This Section has considered some practical implications ofapplying a capitalisation and non-capitalisation approach toaccounting for heritage assets. While there are clearlydifficulties in valuing heritage assets, simplifications toexisting valuation requirements and other pragmatictreatments are proposed to support implementation of acapitalisation approach. Where valuation of heritage assets isnot practicable, an entity should have regard to specific teststo justify adoption of a non-capitalisation approach. Heritageasset acquisitions and disposals under a non-capitalisationapproach would be reported in a separate statementreconciling gains and losses to total recognised net assets.
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S E C T I O N 5 :D I S C L O S U R E R E Q U I R E M E N T S
5.1 In considering what accounting should try to do, thedesirable requirements for the financial reporting of heritageassets identified in Section 2 were, briefly:
(a) the provision of relevant and reliable financialinformation which is readily understandable to users,prepared on a consistent basis that facilitates comparisonbetween accounting periods and between similarentities; and
(b) information that helps an assessment of the entity’sstewardship and discloses the resources ‘invested’ inheritage assets through their acquisition, maintenanceand restoration.
5.2 A feature of the proposals developed in Section 3 of theDiscussion Paper is that the capitalisation and non-capitalisation accounting approaches should besupplemented with appropriate disclosures to provideuseful and relevant information about the heritage assetsheld.
5.3 This Section proposes disclosure requirements in light ofthese considerations and the practical issues identified inSection 4 of the Discussion Paper.
Existing disclosure requirements
5.4 FRS 15 currently requires that where alternative approachesto those given in that standard are applied to the valuation ofinalienable and historic assets, adequate disclosures should begiven of the reasons for the different treatment, and of theage, scale and nature of the assets held14. The CharitiesSORP15 requires further disclosures on the use made ofheritage assets together with financial information on
Section 5: Disclosure requirements
37
acquisitions and disposals during the reporting period andaccounting policy notes explaining the charity’scapitalisation policy and measurement bases. It is generallyagreed that these requirements can be widely interpreted andcommentators within the UK sector have noted that underthese existing requirements disclosures could be improved.
5.5 The disclosure requirements for heritage assets contained inthe pronouncements of other jurisdictions are summarised inAppendix 2.
Proposals for disclosures
5.6 Unless indicated, it is proposed that the following disclosuresshould be regarded as the minimum to be provided by areporting entity irrespective of whether the capitalisation ornon-capitalisation approach has been adopted.
5.7 Some entities may provide detailed information for some ofthese disclosures in the Operating and Financial Review$ or,for charitable entities, the Trustees’ Annual Report. It maytherefore be appropriate to refer, in the notes to the financialstatements, to this more detailed accompanying information.
The nature and scale of heritage assets held
5.8 The reporting entity should provide a description of itsheritage assets and an indication of the numbers held. Thisinformation should indicate the extent to which the entityprovides access to the heritage assets. Where heritage assetsare held in collections, this information should be given inaggregate for each collection.
$
An OFR is a narrative explanation, provided in or accompanying the annual report, of the main trends
and factors underlying the development, performance and position of an entity during the period covered by
the financial statements, and those which are likely to affect the entity’s future development, performance
and position.
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Accounting policies
5.9 The accounting policy notes should including cogentreasoning to support the classification of heritage assets assuch and state unambiguously the accounting approachapplied. If, under the capitalisation approach, valuationshave been obtained for some but not all groups of heritageassets so that most of the total value is capitalised, this shouldbe clearly stated. The valuation methodology and the policyfor depreciation should be disclosed.
5.10 Where a capitalisation approach has not been applied thisshould be clearly explained with reference to why it is notpracticable to provide an assessment of the value of heritageassets through obtaining valuations and making appropriatedisclosures.
Preservation and management policy
5.11 The reporting entity should disclose its policies for thepreservation of the heritage assets it holds. This disclosureshould include references to the aims of conservation (eg toimprove the condition of the assets or to maintain a steadystate of repair), planned programmes for major restorationand maintenance (description and estimate of expenditure)and the extent to which existing programmes have beencompleted, together with the expenditure on restorationprogrammes for the reporting period.
Acquisitions and disposals
5.12 Under either accounting approach an entity will bereporting, in summary for the current accounting period,the acquisition and disposal of heritage assets. It is proposedthat an entity should disclose details of the significant$ assetsacquired in the current reporting period and their cost orestimated value, if donated, which should reconcile to the
$
Significance might be assessed with regard to value or cultural importance.
Section 5: Disclosure requirements
39
additions figure presented in the statement of change inrecognised net assets or the relevant note to the balancesheet. An entity will need to have regard to materialityconsiderations in determining which items are separatelydisclosed. A similar approach should be adopted for heritageassets disposed of during the current reporting period. Themethod of acquisition and disposal should be brieflydescribed.
Funding sources for acquisitions
5.13 Many entities acquire heritage assets as a result of specificfunding received through grant or donation. The fundingsources for acquisitions should be disclosed in a note to theaccounts. This should reconcile to the additions figurepresented in the note to the balance sheet or the statement ofchange in recognised net assets. Funding sources may beidentified, for example, to distinguish between governmentgrants, cash donations, donated assets and utilisation ofexisting cash resources.
Five year financial summary of activity
5.14 Entities can only acquire heritage assets when they becomeavailable; entities may also be constrained by the availabilityof external funding for acquisitions. Activity in the currentreporting period may vary significantly from that in theprevious period. Some commentators have noted that insuch cases comparative information is more useful if it coversthe medium term. It is proposed that the notes to theaccounts should disclose the following financial informationfor the current reporting period and comparativeinformation for the four previous reporting periods:
(a) Acquisitions: purchases and donations of heritage assets;
(b) Proceeds from the disposal of heritage assets;
(c) Funding: grants, cash donations and other incomereceived for the acquisition of heritage assets; and
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(d) Major restoration costs.
The five year financial summary should be supplemented byquantitative and qualitative information where this is useful,for example to interpret trends.
5.15 In this way an entity adopting a non-capitalisation approachwill disclose financial information more relevant and usefulthan that currently reported under FRS 15 which is limitedto the cumulative cost of acquisitions since 2001.
Groups of heritage assets
5.16 Where an entity manages its heritage assets in discrete groups(such as collections), the aggregate asset values for eachgroup should be disclosed in a note to the accounts. Thisshould also provide, for each group, information on balancesheet movements during the reporting period.
5.17 Where the current value of a group of heritage assets isknown, but that value is not capitalised because reliablevaluations cannot be obtained for the majority by value ofheritage assets held this value should be disclosed in a note tothe accounts.
Other useful information
5.18 Many public-benefit entities holding heritage assets,particularly those in the government sector, are requiredto report on aspects of stewardship including keyperformance indicators in their annual reports. Otherentities will have regard to any requirements orrecommendations for preparing an Operating andFinancial Review or Trustees’ Annual Report. In light ofthis, disclosures to be made specifically in accompanyinginformation are not proposed in this Discussion Paper.
Section 5: Disclosure requirements
41
Illustrative examples of disclosures
5.19 The following examples illustrate how the disclosurerequirements proposed in paragraphs 5.8 to 5.17 might beapplied in practice.
Illustrative disclosures under the capitalisation approach
The Vintage Car Museum: the museum holds a collection of vintagecars and a collection of motoring ephemera. The vintage carcollection is capitalised at market value and was acquired throughdonations and purchases. The collection of motoring ephemeraincludes manuals, brochures and advertising material. Most ofthese items were acquired over 5 years ago at nominal cost orthrough donations and there were no transactions for 2004-05. Inthese circumstances, the museum has not made extensivedisclosures about the collection of motoring ephemera.
Note 1 Accounting policies
Tangible fixed assets and depreciation
Heritage assets capitalised in the balance sheet
The Museum maintains a collection of 250 vintage andclassic cars which reflect the history of the British sports carfrom 1900-1960. Approximately 240 of these are on displaywhile the remainder are held in the Museum’s maintenancedepot undergoing or awaiting repair.
Valuation
The cars are reported in the balance sheet at current marketvalue to the extent practicable. Valuations are undertakenperiodically by professional valuers (Parker, Glass and Co).Gains and losses on revaluation are recognised in thestatement of total recognised gains and losses.
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Acquisitions and disposals
Acquisitions are made by purchase or donation. Purchasesare funded from the Museum’s cash resources or specificappeals. The Museum occasionally disposes of objects fromthe collection in order to fund new acquisitions where theTrustees determine this does not detract from the integrity ofthe collection. Individual vehicles are occasionally donatedto the Museum and are valued by reference to the marketvalue as advised by the Museum’s valuers. Furtherinformation is given in Note 7 to the accounts.
Preservation policy
It is the Museum’s policy to maintain vehicles in thecollection in full working order and maintenance costs arecharged to the income and expenditure account whenincurred. The vehicles are deemed to have indeterminatelives and the Trustees do not therefore consider itappropriate to charge depreciation in respect of thecollection.
Heritage assets not capitalised in the balance sheet
The Museum also holds a collection of motoring ephemeraassociated with the history of the British Sports car consistingof manuals, brochures and advertising material. Thecollection is not capitalised in the balance sheet as theTrustees consider the benefit of valuing the collection doesnot justify the costs that would be incurred. Furtherinformation on the collection is given in Note 8 to theaccounts.
Section 5: Disclosure requirements
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Note 7(a) Tangible fixed assets – heritage assets
Vintage carcollection
£000
Cost or valuation
1 April 2004 6,700Additions 200Disposals (50)Revaluation 335
31 March 2005 7,185
The vintage car collection includes the S4 Bentley Sportdriven to victory by John Duff and Frank Clement in the1924 Le Mans race. This vehicle has been included in theaccounts at a value of £150,000 reflecting cars of a similarmodel and vintage. However, the museum’s professionalvaluers have advised that the car would probably realisesignificantly more than this if it were to be sold on the openmarket.
Additions in 2004-05 comprise:
£200k purchase of a private collection of 1950s Jaguar sportscars
The additions were funded as follows:
£125k from cash resources
£50k proceeds from disposals (see below)
£25k from a specific appeal to purchase the privatecollection.
Disposals in 2004-05 comprise:
£50k sale of Lotus Elite and Triumph TR2.
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Note 7(b) Five year summary of purchases and sales of
vehicles
2004-05 2003-04 2002-03 2001-02 2000-01
Additions: £000 £000 £000 £000 £000
Purchases 200 130 100 160 50Donations - 25 - - -
Total additions 200 155 100 160 50
Disposal proceeds 50 - 30 50 -
Purchases funded by:
Cash resources 125 100 100 110 30Specific appeals 25 - - - 20Disposal proceeds 50 30 - 50 -
Sub-total 200 130 100 160 50
NotesSince 2001-02 it has been the Trustees’ policy to acquire vehicles in orderto increase the diversity of the collection.
Note 8 Heritage Assets not capitalised in the balancesheet
The museum holds a collection of motoring ephemeraassociated with the history of the British Sports car. Thecollection comprises some 2,000 objects including manuals,brochures and advertising material. Objects have beenacquired in the past by purchase or through directdonation. There were no major acquisitions or disposalsduring 2004-05 (nil 2003-04).
Section 5: Disclosure requirements
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Illustrative disclosures under the non-capitalisation approach
The Barsetshire Museum: the Museum holds a collection of heritageassets relating to the natural and man-made history of the localarea. The collection comprises three discrete classes of objects:fossils, artefacts and documents. Much of the collection wasacquired over the last 120 years through donation or purchase. It isimpractical for the Museum to value most of its objects owing tothe lack of comparable market values, the diverse nature of theobjects and the volume of items held.
Heritage asset transactions would be presented in the statement ofchange in recognised net assets as follows$:
Statement of change in recognised netassets
£000s £000s
Recognised gains/(losses) for the financial year 1,000Heritage asset transactions (Note 8):
Grants for acquisition of heritage assets 250Cash donations for acquisition of heritage assets 50
Donations of heritage assets 55Proceeds from disposal of heritage assets 10
Acquisition of heritage assets (375)Major restoration costs (50)
Net heritage asset transactions (60)
Change in recognised net assets 940
The following note disclosures would be provided in the financialstatements.
$
The illustration assumes that all heritage asset related transactions are presented in the statement of change
in recognised net assets – see Appendix 3 for discussion.
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Note 1 Accounting policies
Heritage assets not capitalised in the balance sheet
The Museum holds collections of fossils, artefacts anddocuments of historical and scientific importance insupport of the Museum’s objective to increase knowledge,understanding and appreciation of the Barsetshire landscape.The Trustees consider that owing to the diverse nature of theassets held and the lack of market based valuationinformation for most of these as well as the size of thecollections it is not practicable to obtain valuations toprovide sufficient information to make an assessment of thevalue of the collections and so the Museum does notcapitalise the collections in the Balance Sheet.
Acquisitions
Acquisitions are presented in the Statement of Change inRecognised Net Assets as reductions in net assets when legaltitle passes to the Museum. Acquisitions are made bypurchase or donation. Purchases are recorded at cost anddonations are recorded at market value ascertained by theMuseum’s curators with reference, where possible, tocommercial markets using recent transaction informationfrom auctions.
Disposals
In exceptional circumstances, and with the approval of theTrustees, collection items may be disposed of. Proceeds fromdisposals are presented in the Statement of Change inRecognised Net Assets as increases in net assets.
Income restricted to the acquisition of heritage assets
Income from grants and cash donations received specificallyto acquire heritage assets is presented in the Statement ofChange in Recognised Net Assets when it is received.
Section 5: Disclosure requirements
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Occasionally the Museum receives bequests which includeobjects already represented in the Museum’s collections. TheMuseum’s Trustees permit disposal of these objects throughsale to acquire objects to be added to the collections. Saleproceeds are reported in the Statement of Change inRecognised Net Assets as increases in net assets.
Unrestricted income from whatever source that issubsequently used to purchase collection items isrecognised in the income and expenditure account when itis received.
Preservation policy
The Museum has a rolling programme of major restorationdeveloped from a comprehensive review of the condition ofthe documents collection undertaken in 2000-01.Expenditure which, in the Trustees’ view, clearly preventsfurther deterioration of individual collection items isreported, when it is incurred, as decreases in net assets inthe Statement of Change in Recognised Net Assets.
Further information on the collections is given in Note 8 tothe accounts.
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Note 8 Heritage Assets not capitalised in the balancesheet
(a) Nature and scale of heritage assets held
The Museum holds three collections comprising fossils,artefacts and documents. The collections have beendeveloped over 120 years and are used for reference,research and education. The Museum occasionally makesavailable on loan, objects to other regional museums andreceives objects on loan.
At any time approximately twenty per cent of the collectionsare on display. The remaining items are held in storage butare available for research purposes.
Fossils
The collection consists of 2,000 specimens from theCretaceous to the Pleistocene period (145 to 2 millionyears ago) and includes fossil fish remains such as shark andray teeth, marine molluscs and sponges and disarticulatedremains of fossil dinosaurs and mammals. It records thedevelopment of fauna from the local area. The collection wascreated from a bequest from Octavius Bayley, Victorianphilanthropist and fossil enthusiast.
Artefacts
The collection consists of 5,000 miscellaneous man-madeobjects including flints, pottery and coins from the period3000 BC to 1900 AD and reflects the activity of man in thelocal area over this period. The collection has beendeveloped over many years from digs and field surveysundertaken by the county archaeologists.
Section 5: Disclosure requirements
49
Documents
The collection consists of 3,000 documents from the last 400years illustrating the changing landscape and local populace.The collection includes maps, deeds, sketches, paintings andphotographs. It has been significantly enhanced by the recentacquisition from a private collection of 100 watercolours ofmiscellaneous Barsetshire landscapes from the late 19th andearly 20th centuries.
(b) Five year financial summary of collection activity:
2004-05 2003-04 2002-03 2001-02 2000-01
Funding £000 £000 £000 £000 £000
Grants 250 35 10 200 20Cash donations 50 - - - -Donations ofheritage assets
55 35 20 45 35
Disposal proceeds 10 - - 50 -
Sub-total 365 70 30 295 55
Additions
Purchases (320) (50) (25) (55) (45)Donations (55) (10) (5) (15) (3)
Sub-total (375) (60) (30) (70) (48)
Restoration costs (50) (50) (50) (50) -
Net heritage assettransactions
(60) (40) (50) 175 7
NotesIn 2001-02 a £200k Heritage Lottery Fund grant was received toundertake a major restoration of documents. See note 8(e) for furtherdetails.
Accounting Standards Board january 2006 discussion paper
50
(c) Acquisitions in 2004-05 and their sources of funding
£320,000 purchases – 100 watercolours of Barsetshirelandscapes acquired from a private collector
£55,000 donation – 100 miscellaneous items receivedthrough a bequest
£375,000
Acquisitions were funded as follows:
£20,000 utilisation of existing cash resources
£355,000 specific grants and donations of cash and heritageassets.
£375,000
Grants and donations in 2004-05 comprise:
£250,000 heritage lottery grant to acquire watercolourlandscapes.
£55,000 bequest
£50,000 cash donations
£105,000
£355,000
(d) Heritage assets of particular importance$
The Museum holds a number of objects which the Trusteesregard as particularly important to the collections. They arelikely to have a significant monetary value in comparisonwith other items in the collections. These objects are:
$
These particular disclosures are not required by the proposals set out in paragraphs 5.8-5.17.
Section 5: Disclosure requirements
51
Artefacts from the tomb of Baron Percy de Barsette ca 1100-1160 comprising chain mail armour, a long shield and sword.Whilst these objects are in poor condition they are extremelyrare in Great Britain and their value is unknown.
A portrait of the Lady Elinor May, Countess of Barset byWilliam Maclean ca 1750. The portrait is unusual as Macleanis more widely known for his landscapes of the ScottishHighlands. Consequently the value of the portrait is difficultto determine but a Maclean landscape was recently sold atauction for £3 million.
(e) Major restoration costs$
The Museum aims to maintain the condition of specimens ina steady state. Following a flood in 2000-01 an extensivereview of the condition of archived documents wasundertaken and following award of a grant from theHeritage Lottery Fund, the Museum put in place a rollingprogramme of maintenance to counter the furtherdeterioration of specific documents. The total estimatedcost of the restoration programme is some £250,000. Thisprogramme is about 80 per cent complete. £50,000 has beenreflected in the Statement of Change in Recognised NetAssets in respect of this activity during 2004-05.
$
The illustration assumes that all heritage asset related transactions are presented in the statement of change
in recognised net assets – see Appendix 3 for discussion.
Accounting Standards Board january 2006 discussion paper
52
The Ancient Monument Museum: the Ancient Monument Museummaintains four Neolithic burial mounds. The museum does nothold a collection of related artefacts. The museum periodicallyundertakes restoration works, although none has been undertakenrecently. As there are no heritage asset transactions to report forthe period, the museum has not prepared a statement of change inrecognised net assets. The following disclosures are provided inthe financial statements.
Footnote to Income and Expenditure Account
The net surplus represents the total change in recognised netassets and so no separate Statement of Change in RecognisedNet Assets has been prepared.
Note 1 Accounting policies
Heritage assets not capitalised in the balance sheet
The Museum maintains four neolithic burial mounds insupport of the Museum’s objective to protect these historicmonuments for the benefit of future generations. The burialmounds were acquired during the 19th century as a gift fromthe former landowner at no cost to the Museum. TheTrustees consider that owing to the incomparable nature ofthe burial mounds it would not be practicable to obtainvaluations for them and so no value is reported in theMuseum’s balance sheet.
Expenditure on major restoration
The cost of associated major repairs is reported in theStatement of Change in Recognised Net Assets in the year itis incurred.
Further information on the collections is given in Note 8 tothe accounts.
Section 5: Disclosure requirements
53
Note 8 Heritage Assets not capitalised in the balancesheet
Neolithic burial mounds
The Museum maintains four neolithic burial mounds whichwere acquired during the 19th century as a gift from theformer landowner at no cost to the Museum and no valuesare capitalised in the balance sheet for the mounds. Norelated artefacts are held.
There were no acquisitions or disposals of heritage assetsduring 2004-05 (nil 2003-04).
Major restoration costs
The Museum aims to maintain the condition of theearthworks in a steady state of repair. Detailed surveys areundertaken at least every 5 years. The last survey was carriedout during 2001-02 following a landslip. As a result, someunderpinning work was undertaken. The cost of these workswas not capitalised in the balance sheet. No major restorationcosts were incurred during 2004-05.
Accounting Standards Board january 2006 discussion paper
54
S E C T I O N 6 :H I S T O R I C A S S E T S U S E D B Y T H EE N T I T Y I T S E L F
6.1 Some assets have service potential in addition to theirheritage qualities$. For example, an historic building thathouses university teaching facilities may be preserved as anarchitectural reference because of its historic andarchitectural qualities. However, its principal purpose is toprovide teaching facilities and it may be possible for theuniversity to obtain the same utility or service potential froman alternative non-heritage building.
6.2 Consequently the historic building is not held principally forits contribution to knowledge and culture, a requirement ofthe proposed definition of a heritage asset{. In thesecircumstances it should be accounted for under existingfinancial reporting requirements for tangible fixed assets. Itsvaluation would be derived from the replacement cost of theservice potential as teaching and office accommodation andwould not reflect its heritage qualities.
6.3 It is sometimes asked whether a building which housesheritage assets should be regarded as a heritage asset itself. Abuilding may be of historic or architectural importance andgive context to the heritage assets it houses, such as thehouse and museum of the architect Sir John Soane. Incontrast to the university, it is not possible to obtain thesame utility or service potential from an alternative non-heritage building. The building is held principally for itsintrinsic contribution to knowledge and culture thusmeeting the proposed definition for a heritage asset.
$
Some commentators refer to these as multi-purpose heritage assets or operational heritage assets.{ An asset with historic, artistic, scientific, technological, geophysical or environmental qualities that is held
and maintained principally for its contribution to knowledge and culture and this purpose is central to the
objectives of the entity holding it (paragraph 1.16).
Section 6: Historic assets used by the entity itself
55
6.4 However, if the building has little historic or architecturalimportance or no association with the heritage assets itcontains and is being used principally to house heritage assetsit would not meet the proposed definition. In this case thebuilding should be accounted for with regard to its servicepotential for this purpose.
6.5 It is proposed that, generally, an historic asset used by theentity itself should be regarded as an item of property, plantor equipment consistent with its service potential andaccounted for under existing financial reportingrequirements for tangible fixed assets. Its valuation wouldbe based on the replacement cost of the service potential andwould not reflect its heritage qualities although disclosures ofthese should be given. Financial performance should reflectthe use of the asset and so the valuation would bedepreciated consistent with this use.
Illustrative example
6.6 The Old University: one of the buildings occupied by theUniversity is a fine example of 16th century architecturewhich houses tutorial rooms and provides officeaccommodation for the University’s registry. As it is usedprincipally for non heritage purposes, the university valuesthe building on the basis of the replacement cost of theteaching facilities and administration accommodation itprovides.
Accounting Standards Board january 2006 discussion paper
56
Note 1 Accounting policies
Tangible fixed assets and depreciation
Historic buildings
The university’s main building was constructed in the16th century and is regarded as a fine example ofarchitecture from the Tudor period. The buildingprovides office accommodation for the university’sregistry and tutorial rooms. The university senateconsiders this to be the most efficient use of thebuilding which, being Grade 1 listed, cannot bealtered. The historic cost of the land and building isnot known and it is valued on the basis of thedepreciated replacement cost of the service potential ofits teaching and administration facilities.
Depreciation is charged to the income and expenditureaccount based on an economic life of 50 yearsconsistent with the university’s policy for non-historic buildings.
Section 6: Historic assets used by the entity itself
57
Capitalised values for the depreciated replacement costassociated with the historic building would be included withthose for other land and buildings. The following note isappended to the table of balances for tangible fixed assets.
Note 7 Tangible fixed assets
Historic buildings
The university’s main building was constructed in the16th century and is regarded as a fine example ofarchitecture from the Tudor period. The historic costof the land and building is not known. The propertywas revalued at 31 July 2004 on the basis of thedepreciated replacement cost of the service potential ofits teaching and administration facilities by CS & Co inaccordance with the Appraisal and Valuation Manual ofthe Royal Institution of Chartered Surveyors.
Accounting Standards Board january 2006 discussion paper
58
S E C T I O N 7 :C O R P O R A T E A R T
7.1 Entities may hold assets that might be regarded as heritageassets but the entities are not primarily heritageorganisations. An example encountered in the UK contextis a government department which happens to hold antiquesand other works of art for decorative purposes. Similarly, aprofit-oriented company may possess antiques or works ofart, not for investment purposes, but which reflect thecompany’s history or are used to create ambience in thecompany’s headquarters.
7.2 Some commentators have referred to these as ‘ambience’heritage assets or ‘corporate art’, they are ‘nice to have’ butnot strictly necessary since contribution to knowledge andculture is not a purpose central to the objectives of theseentities. For example, a company’s primary objective isusually to make a profit. For financial reporting purposes,such assets should not be regarded as heritage assets sincethey do not meet the proposed definition$ even if the assetsare, occasionally, on display to the public.
7.3 In these circumstances the assets should be accounted forunder existing financial reporting requirements for tangiblefixed assets ie recognised at cost or valuation. TheGovernment’s Financial Reporting Manual requiresgovernment entities to report corporate art at a current(open market) value16. Views are welcomed on whetherthere is demand for an accounting standard to address thetreatment of corporate art.
7.4 Assets with heritage qualities but which are held forinvestment purposes only, such as an investment portfolioof works of art, should not be regarded as heritage assets forfinancial reporting purposes.
$
An asset with historic, artistic, scientific, technological, geophysical or environmental qualities that is held
and maintained principally for its contribution to knowledge and culture and this purpose is central to the
objectives of the entity holding it (paragraph 1.16).
Section 7: Corporate art
59
A P P E N D I X 1 :D E F I N I T I O N S O F H E R I T A G E A S S E T S U S E DI N T H E U K A N D O T H E R J U R I S D I C T I O N S
The following table summarises the definitions used in variousjurisdictions together with other defining criteria and examples ofheritage assets cited in the source documents.
Accounting Standards Board january 2006 discussion paper
60
Jurisdiction
Source
Definition
Otherdefiningcriteria/cited
exam
ples
ASB
UK
FRS15
TangibleFixed
Assets
Nospecificdefinition.
Refersto
inalienable,historicandsimilar
assetsof
particularhistoric,scientificorartisticim
portance.
UK
CharityCommission
2005Charities
SORP
Assetsofhistorical,artisticorscientific
importance
thatareheldto
advance
the
preservation,conservationand
educationalobjectives
ofcharitiesand
throughpublicaccesscontributeto
the
achievem
entofthepurposesofsuch
charitiesandincludetheland,
buildings,structures,collections,
exhibitsorartefactsthatarepreserved
orconserved
andarecentralto
the
educationalobjectivesofsuch
charities.
Charitieswithpreservationobjectives
may
hold
specified
orhistoricbuildingsoracomplexof
historicorarchitecturalim
portance
orasite
whereabuildinghas
beenorwhereitsremains
canbeseen.
Conservationcharitiesmay
hold
landrelatingto
thehabitatneedsofspecies,ortheenvironment
generally,includingareasofnaturalbeauty
or
scientificinterest.
Museumsandartgalleries
hold
collectionsand
artefactsto
educatethepublicandto
promotethe
artsandsciences.
UK
CharteredInstitute
ofPubic
Finance
andAccountancy
2005SORPforlocalauthorities
Nodefinitionofheritageassets.
Definitionofcommunityassets:‘assets
thatthelocalauthority
intendsto
hold
inperpetuity,thathaveno
determinableusefullife,andthatmay
haverestrictionsontheirdisposal.’
Exam
plesofcommunityassetsareparksand
historicbuildings.
Appendix 1: Definitions of heritage assets
61
Jurisdiction
Source
Definition
Otherdefiningcriteria/cited
exam
ples
UK
HM
Treasury
anddevolved
administrations
GovernmentFinancialReporting
Manual
Assetsthatareintended
tobepreserved
intrustforfuture
generationsbecause
oftheircultural,environmentalor
historicalassociations.
They
areheldbytheentityinpursuitofitsoverall
objectives
inrelationto
themaintenance
ofthe
heritage.Non-operationalheritageassetsarethose
thatareheldprimarilyforthispurpose.
Operationalheritageassetsarethose
that,in
additionto
beingheldforheritagepurposes,are
also
usedbytheentity
forother
activitiesorto
provideother
services
(themostcommon
exam
plebeingbuildings).
UK
English
Heritage
Managinglocalauthorityheritage
assets–someguidingprinciples
for
decision
makers,June2003
Heritageassetsinclude:
scheduledmonuments
andother
archaeologicalremains;historic
buildingsboth
statutorilylisted
andthoseofmore
localim
portance;conservationareas;historic
landscapes,includingregisteredparksandgardens,
cemeteriesandregisteredbattlefields;andhistoric
elem
entsofthewider
publicrealm,including
publiclyowned
andmanaged
spaces
and
recreationalparks.
Accounting Standards Board january 2006 discussion paper
62
Jurisdiction
Source
Definition
Otherdefiningcriteria/cited
exam
ples
IPSASB
IPSAS17
Property,
plantandequipment
Nogenericdefinition.Notesthatsome
assetsaredescribed
asheritageassets
because
oftheircultural,
environmental,orhistorical
significance.
Exam
plesarehistoricalbuildingsandmonuments,
archaeologicalsites,conservationareasandnature
reserves,andworksofart.Characteristicsoften
displayed
byheritageassetsinclude:
Cultural,environmental,educationaland
historicalvalueunlikelyto
befullyreflectedin
a
financialvaluebased
purely
onmarket
price;
Legal/statutory
obligationsmay
impose
prohibitionsorsevererestrictionsondisposalby
sale;
Often
irreplaceableandvaluemay
increase
overtimeeven
ifphysicalconditiondeteriorates;
Difficultto
estimateusefullives
whichcould
be
severalhundredyears.
FASB
United
States
FAS116
Accountingforcontributionsreceived
andcontributionsmade
Nogenericdefinition
Reference
tocollectionswiththefollowing
characteristics:(a)heldforpublicexhibition,
educationorresearch
infurtherance
ofpublic
servicerather
than
financialgain(b)protected,
keptunencumbered,caredfor,andpreserved
(c)subjectto
anorganizationalpolicy
thatrequires
theproceedsfrom
salesofcollectionitem
sto
be
usedto
acquireother
item
sforcollections.
Appendix 1: Definitions of heritage assets
63
Jurisdiction
Source
Definition
Otherdefiningcriteria/cited
exam
ples
FASAB
United
States
SFFAS29
Heritageassetsandstewardship
land
Property,plantandequipmentunique
foroneormore
ofthefollowing
reasons:
Historicalornaturalsignificance;
Cultural,educational,orartistic
(egaesthetic)im
portance;or
Significantarchitecturalcharacteristics
Heritageassetsconsistof:
�Collectiontypeheritageassets,such
asobjects
gathered
andmaintained
forexhibition,eg
museum
collections,artcollectionsandlibrary
collections;and
�Non-collectiontypeheritageassets,eg
parks,
mem
orials,monumentsandbuildings
Heritageassetsaregenerally
expectedto
be
preserved
indefinitely.
Heritageassetsmay
insomecasesbeusedto
serve
twopurposes-aheritagefunctionandgeneral
governmentoperations.In
caseswhereaheritage
assetserves
twopurposes,itshould
beconsidered
amulti-use
heritageassetifthepredominantuse
oftheassetsisin
generalgovernmentoperations.
Heritageassetshavingincidentaluse
in
governmentoperationsarenotmulti-use
heritage
assets;they
aresimply
heritageassets.
GASB
United
States
Statement34
Basicfinancialstatem
ents–and
managem
ents’discussionand
analysis–forStateandLocal
governments
Nogenericdefinition.Reference
to
worksofartandhistoricaltreasures.
Characteristicsofcollectionsdefined
asfor
FAS116.
CIC
A
Canada
PublicSectorHandbook
SectionPS3150,Tangible
CapitalAssets
Nogenericdefinition.
Worksofartandhistoricaltreasuresareproperty
thathascultural,aestheticorhistoricalvaluethatis
worthpreservingperpetually
Accounting Standards Board january 2006 discussion paper
64
Jurisdiction
Source
Definition
Otherdefiningcriteria/cited
exam
ples
CIC
A
Canada
CIC
AHandbookSection4440
Collectionsheld
bynot-for-profit
organizations
Nogenericdefinition.
Collectionsareworksofart,historicaltreasuresor
similarassetsthatare(i)heldforpublicexhibition
orresearch;(ii)protected,caredforandpreserved;
and(iii)subject
toan
organizationalpolicy
that
requiresanyproceedsfrom
theirsaleto
beusedto
acquireother
item
sto
beadded
tothecollection
orforthedirectcare
oftheexistingcollection.
ASB
South
Africa
GRAP17
Property,
plantandequipment
AsIPSAS17.ASB’srecent
consultationincluded
proposed
definitionsofheritageassets.
Heritageassetsusedforheritagepurposesonlyare
defined
asinalienableand/orother
item
sthatare
norm
ally
heldfortheiruniquecultural,
environmental,historical,naturalorartistic
significance
rather
than
foruse
intheday-to-day
operationsoftheentity.
Heritageassetsusedorheldformultipurposesare
defined
asinalienableand/orother
item
sthatare
norm
ally
heldfortheiruniquecultural,
environmental,historical,naturalorartistic
significance,butarealso
usedto
generatefuture
economicbenefitsorservicepotential.
FRSB
New
Zealand
FRS3Accountingforproperty,
plantandequipment
NZIAS16Property,
plantand
equipment
Reference
toheritageassetsand
communityassetsbutnospecific
definitions.
Artefactsofculturalorhistoricalsignificance.
Appendix 1: Definitions of heritage assets
65
Jurisdiction
Source
Definition
Otherdefiningcriteria/cited
exam
ples
New
Zealand
Valuationguidanceforculturaland
heritage
assets.New
Zealand
Treasury,Novem
ber2002
Culturalandheritageassetsdefined
as
assetsthatareheldforthedurationof
theirphysicallives
because
oftheir
uniquecultural,historical,
geographical,scientific,and/or
environmentalattributes.They
assist
holdersoftheassetsto
meettheir
objectives
inregardto
exhibition,
education,research
andpreservation,
allofwhicharedirectedatprovidinga
culturalserviceto
thecommunity.
Culturalandheritageassetsinclude,
butarenot
limited
togeneralcollectionsin
libraries;heritage
collectionsin
libraries;museum
collections;art
gallery
collections;historicaldocuments,historical
monumentsandheritageassetsheldin
local
authority
trusts.
AASB
Australia
ThegenericStandard
AASB116Property,
Plantand
Equipmentapplies
exceptwhen
itconflictswithAAS27
Financialreportingby
local
governments,AAS29Financial
reportingby
government
departmentsandAAS31
Financialreportingby
government
andthen
those
standardsapply.
AASs29and31explicitlyreferto
heritageassetsandcommunityassets
butnospecificdefinitions.
Exam
plesofheritageassetsarehistoricalbuildings
andmonuments.Exam
plesofcommunityassets
areparksandrecreationalreserves.
France
CentralGovernment
AccountingStandards
Standard6TangibleAssets
Nogenericdefinition.Reference
to
assetsthathaveonly
historicalor
culturaluseswithan
unmeasurable
servicepotentialrelateddirectlyto
theirsymbolicvalue,andworksofart.
Accounting Standards Board january 2006 discussion paper
66
Jurisdiction
Source
Definition
Otherdefiningcriteria/cited
exam
ples
Germany
North
Rhine
Westphalia
Municipalaccountingstandards
Nogenericdefinition.Reference
to
movableassetsforthemaintenance
of
culture,worksofart,exhibitsand
other
moveableculturalobjects,
architecturalmonumentsand
archaeologicalmonuments.
UNESCO
Convention
concerningthe
protection
oftheworld
culturaland
naturalheritage,Novem
ber1972
Thefollowingshallbeconsidered
as‘‘culturalheritage’’:
�monuments:architecturalworks,worksofmonumentalsculpture
andpainting,elem
ents
orstructuresofan
archaeologicalnature,inscriptions,cavedwellingsandcombinationsof
features,whichareofoutstandinguniversalvaluefrom
thepointofviewofhistory,artor
science;
�groupsofbuildings:groupsofseparateorconnectedbuildingswhich,because
oftheir
architecture,theirhomogeneity
ortheirplace
inthelandscape,areofoutstanding
universalvaluefrom
thepointofview
ofhistory,artorscience;
�sites:worksofman
orthecombined
worksofnature
andman,andareasincluding
archaeologicalsiteswhichareofoutstandinguniversalvaluefrom
thehistorical,aesthetic,
ethnologicaloranthropologicalpointofview.
Thefollowingshallbeconsidered
as‘‘naturalheritage’’:
�naturalfeaturesconsistingofphysicalandbiologicalform
ationsorgroupsofsuch
form
ations,whichareofoutstandinguniversalvaluefrom
theaestheticorscientificpoint
ofview;
�geologicalandphysiographicalform
ationsandpreciselydelineatedareaswhichconstitute
thehabitatofthreatened
speciesofanim
alsandplantsofoutstandinguniversalvaluefrom
thepointofview
ofscience
orconservation;
�naturalsitesorprecisely
delineatednaturalareasofoutstandinguniversalvaluefrom
the
pointofview
ofscience,conservationornaturalbeauty.
Appendix 1: Definitions of heritage assets
67
A P P E N D I X 2 :C U R R E N T R E P O R T I N G R E Q U I R E M E N T S I NT H E U K A N D O T H E R J U R I S D I C T I O N S
The following table summarises the reporting requirements forheritage assets currently used in various jurisdictions.
Accounting Standards Board january 2006 discussion paper
68
Jurisdiction
Standard
Recognition
Measurement
Disclosure
Notes
ASB
UK
FRS15
TangibleFixed
Assets
Requires
recognition
whereheritageassetscan
bemeasuredreliablyand
costsofdoingso
arenot
significant.
Encourages
butdoes
not
requireretrospective
capitalisation.
Cost.
Donated
assetsmeasured
atcurrentvalue.
Requires
disclosure
of
reasonsforaccounting
treatm
ent,andofthe
age,nature
andscaleof
theassetsanduse
made
ofthem
.
Standard’srequirem
ents
supplementedby
CharitiesSORPand
GovernmentFinancial
ReportingManual.
IPSASB
IPSAS17Property,
plantandequipment
Notrequired
unless
heritageassetsmeet
definitionofPPE.
Forrecognised
heritage
assetsentity
ispermitted
butnotrequired
toapply
measurement
requirem
ents.
Forrecognised
heritage
assets,standardPPE
disclosuresarerequired.
Does
notaddress
treatm
entofun-
recognised
heritage
assets.
Appendix 2: Current reporting requirements
69
Jurisdiction
Standard
Recognition
Measurement
Disclosure
Notes
FASB
United
States
FAS116Accounting
forcontributions
received
and
contributionsmade
Permitsnon-recognition
ofdonated
worksofart,
historicaltreasuresand
similar
assetsifadded
to
collectionsthatarenot
capitalised
andareheld
under
specified
conditions.
Requires
such
contributionsto
be
reported
onface
of
statem
entofactivities
separatelyfrom
revenues,expenses,
gainsandlosses.
Fairvalue.In
absence
of
quotedmarket
prices
then
quotedmarket
pricesforsimilar
assets,
independentappraisals
orvaluationtechniques.
Fornon-recognised
collectionsrequires
descriptionof
collections,including
relativesignificance
and
accountingand
stew
ardship
policies
for
collections.Andfor
deaccesseditem
s,a
descriptionandfair
value.
Firsttimeadoption
encourages
butdoes
not
requirecapitalisationof
collectionseither
retrospectivelyor
prospectively.
FAS93Recognition
ofdepreciation
by
not-for-profit
organizations
Permitspolicy
ofno
depreciationfor
individualworksofart
orhistoricaltreasures*
withextraordinarilylong
lives
*assetindividually
has
cultural,aesthetic,or
historicalvaluethatis
worthpreserving
perpetually
andholder
hasabilityto
protectand
preserveessentially
undim
inished
theservice
potentialoftheassetand
isdoingso.
Accounting Standards Board january 2006 discussion paper
70
Jurisdiction
Standard
Recognition
Measurement
Disclosure
Notes
FASAB
United
States
SFFAS29Heritage
assetsand
stewardshipland
Requires
costof
acquisition,
construction,
reconstructionor
improvem
entofheritage
assetsto
beexpensed.
Donationsarenot
recognised.
Requires
costof
acquisition,betterm
ent
orreconstructionof
multi-use
heritage
assets*to
becapitalised
anddepreciated.
*predominantuse
of
heritageassetisin
generalgovernment
operations.
Expense
measuredat
cost.
Donated
multi-use
heritageassetscapitalised
atfairvalue.
Requires
detailed
disclosuresforheritage
assetsandmulti-use
heritageassets:
Statementofhow
they
relate
tomissionof
entity,descriptionof
stew
ardship
policies
(concerningacquisition,
maintenance,use
and
disposal),descriptionof
each
majorcategory,
quantificationin
term
s
ofphysicalunits*
for
each
majorcategory:
physicalunitsheld,
acquisitionsand
withdrawals,fairvalueof
donationsifknownand
conditionofassets.
*may
beacollectionor
groupofassetslocatedat
onefacility.
SSFAS29issued
July
2005iseffectivefor
reportingperiods
beginning30September
2005andreplacesthe
reportingrequirem
ents
forheritageassetssetout
inSFFAS6,SFFAS8
andSFFAS16.
Stewardship
disclosures
areessentialto
fair
presentation.
Appendix 2: Current reporting requirements
71
Jurisdiction
Standard
Recognition
Measurement
Disclosure
Notes
GASB
United
States
GASBS34Basic
financialstatem
ents–
andmanagem
ents’
discussionand
analysis–forState
andLocal
governments
Requires
capitalisation
ofhistoricaltreasuresnot
heldin
collections.
Encourages
butdoes
not
requirecapitalisationof
collectionsandadditions
tothose
collections
(whether
purchased
or
donated)ifcollection
meetsspecified
conditions.
Capitalised
atcostor,
wheredonated,atfair
value.
Depreciationnot
required
forcapitalised
collectionsorindividual
item
sthatare
inexhaustible.
Forcollectionsnot
capitalised,description
ofcollectionandreasons
fornon-capitalisation.
Usualfixed
asset
disclosuresfor
collectionsthatare
capitalised.
CIC
A
Canada
PublicSector
HandbookSection
PS3150,Tangible
CapitalAssets
Worksofartand
historicaltreasures
wouldnotberecognized
astangiblecapitalassets
ingovernmentfinancial
statem
entsbecause
a
reasonableestimateof
thefuture
benefit
associated
withsuch
property
cannotbe
made.
Thenature
oftheworks
ofartandhistorical
treasuresheldbythe
governmentshould
be
disclosed.
Accounting Standards Board january 2006 discussion paper
72
Jurisdiction
Standard
Recognition
Measurement
Disclosure
Notes
CIC
A
Canada
CIC
AHandbook
section4440
Collectionsheld
by
not-for-profit
organizations
Recognitionof
collectionnotrequired
althoughitisnot
precluded
(collection
item
sareexcluded
from
thedefinitionofcapital
assets).
Notspecified
[by
inference,worksofart
andhistoricaltreasures
notheldin
collections
aremeasuredatcostif
knownandfairvalueif
costisnotknown]
Descriptionof
collection,accounting
policies
followed,details
ofanysignificant
changesto
thecollection
intheperiod,
expenditureson
collectionitem
sin
the
period,proceedsofsales
ofcollectionitem
sin
periodandhow
the
proceedswereused.
Onlyapplies
toworksof
art,historicaltreasuresor
similar
assetsheldas
part
ofacollection.Ifnot
heldas
partofa
collectionaccounting
requirem
entsforPPE
apply.
Appendix 2: Current reporting requirements
73
Jurisdiction
Standard
Recognition
Measurement
Disclosure
Notes
ASB
South
Africa
GRAP17Property,
plantandequipment
Notrequired
even
thoughthedefinition
andrecognitioncriteria
ofPPEaremet.
Therecentdiscussion
paper
proposesthat
multi-purpose
heritage
assetsshould
be
recognised
asan
assetin
accordance
withPPE
recognition
requirem
ents,andthat
thecostsofacquisition,
improvem
ent,
reconstructionor
renovationofassetsused
forheritagepurposes
only,beexpensedwhen
incurred.
Forrecognised
heritage
assetsentity
isnot
required
toapply
measurement
requirem
ents.
Therecentdiscussion
paper
proposesthat
multi-purpose
heritage
assetsshould
be
measuredin
accordance
withPPEmeasurement
requirem
ents.
Forrecognised
heritage
assets,standardPPE
disclosuresarerequired.
Therecentdiscussion
paper
proposesthe
disclosure
requirem
ents
inPPEbeapplied
to
multipurpose
heritage
assets.In
addition,
relevantanduseful
inform
ationdisclosedin
notesforboth
types
of
heritageassets.
Existingrequirem
ents
based
onIPSAS17.
Accounting Standards Board january 2006 discussion paper
74
Jurisdiction
Standard
Recognition
Measurement
Disclosure
Notes
FRSB
New
Zealand
FRS-3
Accounting
forproperty,plant
andequipment
NZIAS16
Property,
plantand
equipment
Requires
recognitionof
allculturalandheritage
assetsthatmeetthe
definitionofPPEand
canbereliably
measured.
Initialrecognitionat
cost.Revaluation
permittedusingfair
value,other
market
based
evidence
or
depreciated
replacement
cost*.
Donated
assetsmeasured
atfairvalue.
Nospecialrequirem
ents
forheritageassets.
*Standard
supplementedby
valuationguidance
issued
byNZTreasury
forgovernmentbodies.
AASB
Australia
Thegeneric
Standard
AASB116
Property,
Plantand
Equipmentapplies
exceptwhen
it
conflictswith
AAS27Financial
reportingby
local
governments,AAS
29Financial
reportingby
government
departmentsand
AAS31Financial
reportingby
governmentandthen
those
standards
apply.
Requires
recognition
providingitisprobable
futureeconomicbenefits
ariseandacostorother
valuecanbemeasured
reliably.
Initialrecognitionat
cost.Donated
assets
initiallymeasuredatfair
value.
Nospecificdisclosure
requirem
ents.
Standardssupplemented
byGovernmentFinance
Minister’sOrdersand
similar
ordersmadein
each
stateandterritory.
Appendix 2: Current reporting requirements
75
Jurisdiction
Standard
Recognition
Measurement
Disclosure
Notes
France
CentralGovt
AccountStandards
Standard6Tangible
Assets
Requires
recognitionto
ensure
consistency
betweenphysicaland
accountinginventories.
Valueatanon-revisable
notionalcost,or
exceptionally
at
reproductioncost.
Worksofartmustbe
recognised
atanotional
value.
Market
valueformulti-
purpose
heritageassets.
Forallheritageassets,
subsequentadditions
recognised
atacquisition
cost.Donations
recognised
atmarket
value.
Requires
typicalbalance
sheetnote
disclosures.
Statementlistingassets
such
ashistorical
monuments.
Firsttimeadoption:
applies
toassetswithno
directlyobservable
market
valueandwith
anunmeasurableservice
potentialrelateddirectly
totheirsymbolicvalue
Germany
North
Rhine
Westphalia
Municipal
accounting
standards
Requires
recognitionon
firsttimeadoption.
Forsignificantmoveable
heritageassets–actualor
notionalinsurance
value.
Other
worksofart,
exhibitsandmonuments
–notionalvalue(k
1).
Subsequentadditions
recognised
atcost.
Nospecificdisclosure
requirem
ents.
Accountingand
valuationmethods
should
bedisclosedin
a
note.
Accrualsbased
accountingstandardsare
currentlybeing
introducedin
the
German
Lander.Each
Landmay
developits
ownspecialregulations
toapply
toheritage
assets.
Accounting Standards Board january 2006 discussion paper
76
A P P E N D I X 3 :S T A T E M E N T O F C H A N G E I N R E C O G N I S E DN E T A S S E T S
Reporting related transactions (paragraph 4.18)
1 In paragraph 4.15 it was proposed that a statement of changein recognised net assets be developed to reconcile reportedfinancial performance to the movement in recognised netassets by including heritage asset acquisitions and disposals.
2 The following paragraphs consider whether other transactionsrelated specifically to heritage assets might also be reported inthe statement of change in recognised net assets. These includedonations of heritage assets, cash donations and grants toacquire heritage assets and the costs of major restoration. Thefollowing scenario is used for illustrative purposes:
A reporting entity acquires two heritage assets: one through donationvalued at £100k and one through purchase at £150k and receivesproceeds of £25k from the sale of heritage assets. It has income of£1,500k comprising: trading income (£1,305k), grants to acquireheritage assets (£80k), cash donations (£15k) and donated heritageassets (£100k). Reported expenditure of £500k comprisesadministration costs (£455k) and the costs of major restoration of aheritage asset (£45k). There are no other reported gains or losses.
Acquisitions and disposals
3 Under the proposals set out in paragraph 4.15 the acquisitionand disposal transactions would be reported in the statement ofchange in recognised net assets. Other transactions would bereported in the income and expenditure account:
Appendix 3: Statement of change in recognised net assets
77
Income and expenditure account £000s £000s
IncomeTrading income 1,305
Grants to acquire heritage assets 80Donated assets 100Cash donations 15 1,500
ExpenditureAdministration costs (455)
Major restoration costs (45) (500)
Surplus 1,000
Statement of change in recognised netassets
£000s £000s
Recognised gains/(losses) for the financial year 1,000Heritage asset transactions:Proceeds from disposal of heritage assets 25Acquisition of heritage assets (250)Net heritage asset transactions (225)
Change in recognised net assets 775
Donations of heritage assets
4 Many heritage assets are acquired though direct donation andbequests. The matching credit (currently reported as a gain inthe income and expenditure account) could instead be linkedto the acquisition of the heritage asset and reported with it inthe statement of change in recognised net assets as well.
Income and expenditure account £000s £000s
IncomeTrading income 1,305
Grants to acquire heritage assets 80Cash donations 15 1,400
ExpenditureAdministration costs (455)
Major restoration costs (45) (500)
Surplus 900
Accounting Standards Board january 2006 discussion paper
78
Statement of change in recognised netassets
£000s £000s
Recognised gains/(losses) for the financial year 900Heritage asset transactions:
Donations of heritage assets 100Proceeds from disposal of heritage assets 25
Acquisition of heritage assets (250)Net heritage asset transactions (125)
Change in recognised net assets 775
Funding the acquisition of heritage assets
5 A heritage asset is often acquired using grants or cashdonations given specifically for its purchase (currentlyreported as a gain in the income and expenditure account).In this context the income is restricted, ie it can only beapplied to the purchase of the specific heritage asset and is notavailable for general appropriation. In these circumstances itmay therefore be appropriate to report the receipt of theseresources, separately from other income, in the statement ofchange in recognised net assets.
Income and expenditure account £000s £000s
IncomeTrading income 1,305 1,305
ExpenditureAdministration costs (455)
Major restoration costs (45) (500)
Surplus 805
Appendix 3: Statement of change in recognised net assets
79
Statement of change in recognised netassets
£000s £000s
Recognised gains/(losses) for the financial year 805Heritage asset transactions:
Grants for acquisition of heritage assets 80Cash donations for acquisition of heritage assets 15
Donations of heritage assets 100Proceeds from disposal of heritage assets 25
Acquisition of heritage assets (250)Net heritage asset transactions (30)
Change in recognised net assets 775
6 If grant for the acquisition of heritage assets remains unspent atthe year end the amount recognised in the statement might beadjusted, depending on the conditions attaching to the grant.Where resources are received that are not specifically for theacquisition of heritage assets, they would continue to bereported in the income and expenditure account.
Major restoration costs
7 It may be appropriate to report the costs of a major restorationthat is specific to heritage assets in the statement of change inrecognised nest assets. A general principle could be establishedthat subsequent expenditure$ on heritage assets is presentedseparately in the statement if it would otherwise have beencapitalised in the balance sheet had the heritage asset itselfbeen capitalised.
Income and expenditure account £000s £000s
IncomeTrading income 1,305 1,305
ExpenditureAdministration costs (455) (455)
Surplus 850
$
Subsequent expenditure on a tangible fixed asset is recognised as an addition to the asset to the extent that
the expenditure improves the condition of the asset beyond its previously assessed standard of performance
(FRS 15 paragraphs 36 and 37).
Accounting Standards Board january 2006 discussion paper
80
Statement of change in recognised netassets
£000s £000s
Recognised gains/(losses) for the financial year 850Heritage asset transactions:
Grants for acquisition of heritage assets 80Cash donations for acquisition of heritage assets 15
Donations of heritage assets 100Proceeds from disposal of heritage assets 25
Acquisition of heritage assets (250)Major restoration costs (45)
Net heritage asset transactions (75)
Change in recognised net assets 775
8 Charities in the UK already use a single accounting statement(the Statement of Financial Activity or SOFA) which presentsincome and expenditure together with other recognised gainsand losses and reconciles the opening and closing net assetposition. It would seem desirable, in principle, to distinguishheritage asset acquisitions, disposals and associated transactionsfrom other charitable activities and the format of the SOFAshould be flexible enough to accommodate this. For example,the scenario might be presented in a SOFA format as follows:
Appendix 3: Statement of change in recognised net assets
81
Statement of Financial Activity Unrestricted£000
Restricted£000
Total£000
A Incoming resources 1,305 - 1,305B Resources expended (455) - (455)
Net incoming resources beforetransfers
850 0 850
C Gross transfers between funds (75) 75 0
Net incoming resources beforeother gains/losses
775 75 850
D Other gains and losses - - 0
Net movement in funds before heritageasset transactions
775 75 850
Heritage asset transactions:Grants for acquisition of heritage assets
Cash donations for acquisition of heritageassets
Donations of heritage assetsProceeds from disposal of heritage assets
Acquisition of heritage assetsMajor restoration costs
8015
10025
(250)(45)
8015
10025
(250)(45)
Net movement in funds 775 0 775E Reconciliation of funds
Total funds brought forward - - 0
Total funds carried forward 775 0 775
Accounting Standards Board january 2006 discussion paper
82
A P P E N D I X 4 :R E F E R E N C E M A T E R I A L
The following material has been referred to in the text.
Preface1 The Rosetta Stone by Carol Andrews 2003 (The British
Museum Press).2 British Museum website: www.thebritishmuseum.ac.uk.3 Britain’s best museums and galleries by Mark Fisher 2004
(Allen Lane).4 FRAB Fourth Report 2000-2001, June 2001.Section 1: What are heritage assets?5 Statement of Principles for Financial Reporting. Accounting
Standards Board, December 1999. Paragraph 4.6 gives thedefinition of an asset.
6 Statement of Principles for Financial Reporting – proposedinterpretation for public-benefit entities. AccountingStandards Board Exposure Draft, August 2005. Paragraphs4.9 and 4.10 discuss service potential.
7 FRS 15 ‘Tangible Fixed Assets’, Appendix IV Thedevelopment of the FRS, paragraphs 8 and 9 discussinalienable, historic and similar assets.
Section 2: Desirable requirements for the financial reporting ofheritage assets
8 Statement of Principles for Financial Reporting, chapter 1: theobjective of financial statements.
9 Statement of Principles for Financial Reporting – proposedinterpretation for public-benefit entities, paragraphs 1.11 to1.16 discuss the defining class of user.
Section 3: Approaches to accounting for heritage assets10 Statement of Principles for Financial Reporting, chapter 5:
recognition in financial statements.11 FRS 15 ‘Tangible fixed assets’ paragraph 17 deals with the
initial measurement of donated assets received by charities.
Appendix 4: Reference material
83
Section 4: Some practical considerations12 FRS 15 ‘Tangible fixed assets’ paragraphs 63 to 70 deal with
reporting gains and losses on revaluation.13 FRS 15 ‘Tangible fixed assets’ paragraphs 42 to 52 deal with
valuation and frequency of revaluation.Section 5: Disclosure requirements14 FRS 15 ‘Tangible fixed assets’ paragraph 18 includes
disclosure requirements.15 Charities SORP 2005, paragraph 294 sets out disclosure
requirements for heritage assets.Section 7: Corporate Art16 Government Financial Reporting Manual (HM Treasury and
devolved administrations) paragraph 5.2.20 (f) deals withantiques and other works of art.
Accounting Standards Board january 2006 discussion paper
84
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