On March 21, 2019, the FASB issued Accounting Standards Update (ASU) 2019-03, Not-for-Profit Entities (Topic 958): Updating the Definition of Collections. This ASU specifically addresses the use of proceeds from sales of collections and related disclosures. Collections include groupings of art, historical treasures or similar assets that are:
- Held for the public;
- Preserved and protected; and,
- When sold, the proceeds are reserved for specified uses.
Note the ASU impacts not only not-for-profits, such as museums, libraries, zoos, etc. but also for-profit entities that maintain these types of collections.
Under the clarified definition, proceeds from the sale of collection items can be used either to acquire new items or directly care for existing items already in possession. Previous guidance required proceeds to be used only for the acquisition of additional collections. This change aligns the definition of “collections” with that currently used by the American Alliance of Museums.
ASU 2019-03 further requires an entity to disclose:
- If collection sale proceeds can in fact be used to acquire new items and/or for the direct care of existing collections; and,
- If using those proceeds for direct care is allowed, the entity’s definition of “direct care.”
ASU 2019-03 is effective for financial statements issued for fiscal years beginning after December 15, 2019. Early application of the amendments is permitted. The amendments in ASU 2019-03 should be applied on a prospective basis.
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