Reference no: EM132748116

Question: The financial accounting and financial reporting requirements discussed in this chapter are the FASB's second iteration of requirements. The FASB issued its first guidance for nonprofits in 1993. This guidance was the first time that the FASB had proposed that collection items be capitalized, both retroactively and in the future. The proposal was met with a storm of protest from many museums, which argued that the cost of doing so would outweigh the benefits. After further deliberation, the FASB provided the option discussed in the text. Here are some excerpts from the notes to financial statements issued by large museums that have chosen not to capitalize their collections.

The American Museum of National History (Collections note, the year ended June 30, 2017) The Museum has extensive collections of specimens and artifacts that constitute a record of life on Earth. These valuable, and sometimes irreplaceable, collections have been acquired through field expeditions, contributions and purchases since the Museum's inception and represent one of the largest natural history collections in the world. New collection areas include the Museum's frozen tissue collection of DNA and tissue samples as well as large scientific databases of genomic and astrophysical data. The collections provide a resource for scientists around the world and grow significantly each year. In accordance with accounting policies generally followed by museums, the value of the Museum's collections is not reflected in the consolidated statement of financial position.

The Art Institute of Chicago (Art Objects and Library Collections note, the year ended June 30, 2017) The value of the art objects in the permanent collection, and the holdings of the libraries, are excluded from the statements of financial position... All works of art and certain library collections are held for public exhibition, education, or research; they are protected, kept unencumbered, cared for, and preserved; and are subject to strict organizational policies governing their use. The value of the Institute's permanent collection is not subject to reasonable estimation. Therefore, it is not included in the statements of financial position.

Do you agree with the museum's position on not reporting the value of their collections on their financial statements? Why or why not?