Capitalization of Collections
Capitalization is the act of establishing and noting the cash value of assets on an institution’s financial reports. Museum collections are not assets and are, therefore, treated differently from other museum property. Permanent collection objects are held in trust for the benefit of present and future generations to meet the institution’s fiduciary purposes. While these items may have a monetary value prior to acquisition, once they become part of a museum’s permanent collection, that monetary value becomes secondary to their importance in enhancing understanding of our world and ourselves. The Alliance has compiled this set of collections capitalization resources from throughout the nonprofit and museum sector.
This policy on deaccessioning from the Association of Art Museum Directors (AAMD) defines deaccessioning and covers recommendations for use of proceeds from the sale of deaccessioned objects – “directors of member museums should not capitalize or collateralize collections or recognize as revenue the value of donated works” (amended 10/2015).
The Governmental Accounting Standards Board (GASB) offers information about Statement 34, which establishes new financial reporting requirements for state and local governments throughout the United States.
The AASLH provides its position paper on the capitalization of collections in which they assert that collections should not be considered financial assets.
The Financial Accounting Standards Board (FASB) provides the full Accounting for Contributions Received and Contributions Made statement. (PDF, 18 pages)