MA welcomes AIM statement on heritage asset guidelines
Geraldine Kendall, 21.09.2011
AIM says heritage assets should not be valued on balance sheets
The Museums Association (MA) has welcomed a statement issued by the Association of Independent Museums (AIM) disputing an accounting standard that requires some independent museums to include heritage assets as values on their balance sheets.
Museums are not generally obliged to include heritage assets because of an exceptions clause that permits them to document those assets parallel to financial activities, as long as they do so in an open and publicly accountable way.
But Financial Reporting Standard 30 - Heritage Assets (FRS30) recommended that, from the tax year beginning April 2010, charities and charitable companies should include heritage assets on their balance sheets to improve the clarity of their financial reporting.
Around 60% of independent museums in the UK fit this description, though the standard does not apply to smaller organisations whose annual turnover is below £6.5m.
FRS30, which was produced by the Accounting Standards Board in 2009, argues that “if heritage assets are not capitalised, the balance sheet will provide an incomplete picture of an entity’s financial position”.
But AIM has criticised FRS30’s requirements. A statement released by the organisation this summer said: “[FRS30] assumes that collections held in trust for the public must form part of the financial position of a charity, as if the collection could be readily sold on the open market.”
According to AIM chairman Matthew Tanner, this assumption is problematic for museums. He said: “Firstly [there is a difficulty] in the idea that items in the collection are merely financial assets to be valued and traded as desired, and secondly in the excessive cost of valuing such assets.”
He added: “In many cases collection items are unique and irreplaceable, and there is no realistic market for them. Therefore no realistic value can be discerned.”
Tanner also warned that following FRS30’s advice would send out a negative message to past or future donors of items to a collection. He said: “Most will not be happy at the idea of their gift appearing as a tradable financial asset on the balance sheet.”
The only time museums should declare heritage assets on their balance sheets, Tanner said, is when items are purchased for the collection.
He said: “At purchase, a specific value is of course created, and museums must account for the expenditure. However, we recommend writing this amount off in the financial year so that it does not become a longer term asset on the balance sheet.”
AIM advises museums to include a clause on their financial statements explaining why heritage assets have not been reported. The full wording of the clause is available in AIM's statement below.
However, Tanner added that, instead of including assets on balance sheets, museums should be “much more upfront in demonstrating to the public the documentation of collections and the access they provide to them”.
MA collections coordinator Sally Colvin said: “We’ve had some members asking us for advice on FRS30 and the MA welcomes AIM’s very helpful statement on the subject.”
To read AIM’s statement in full, click here
Update
21.09.2011
This article was edited to clarify when FRS30 was produced
Museums are not generally obliged to include heritage assets because of an exceptions clause that permits them to document those assets parallel to financial activities, as long as they do so in an open and publicly accountable way.
But Financial Reporting Standard 30 - Heritage Assets (FRS30) recommended that, from the tax year beginning April 2010, charities and charitable companies should include heritage assets on their balance sheets to improve the clarity of their financial reporting.
Around 60% of independent museums in the UK fit this description, though the standard does not apply to smaller organisations whose annual turnover is below £6.5m.
FRS30, which was produced by the Accounting Standards Board in 2009, argues that “if heritage assets are not capitalised, the balance sheet will provide an incomplete picture of an entity’s financial position”.
But AIM has criticised FRS30’s requirements. A statement released by the organisation this summer said: “[FRS30] assumes that collections held in trust for the public must form part of the financial position of a charity, as if the collection could be readily sold on the open market.”
According to AIM chairman Matthew Tanner, this assumption is problematic for museums. He said: “Firstly [there is a difficulty] in the idea that items in the collection are merely financial assets to be valued and traded as desired, and secondly in the excessive cost of valuing such assets.”
He added: “In many cases collection items are unique and irreplaceable, and there is no realistic market for them. Therefore no realistic value can be discerned.”
Tanner also warned that following FRS30’s advice would send out a negative message to past or future donors of items to a collection. He said: “Most will not be happy at the idea of their gift appearing as a tradable financial asset on the balance sheet.”
The only time museums should declare heritage assets on their balance sheets, Tanner said, is when items are purchased for the collection.
He said: “At purchase, a specific value is of course created, and museums must account for the expenditure. However, we recommend writing this amount off in the financial year so that it does not become a longer term asset on the balance sheet.”
AIM advises museums to include a clause on their financial statements explaining why heritage assets have not been reported. The full wording of the clause is available in AIM's statement below.
However, Tanner added that, instead of including assets on balance sheets, museums should be “much more upfront in demonstrating to the public the documentation of collections and the access they provide to them”.
MA collections coordinator Sally Colvin said: “We’ve had some members asking us for advice on FRS30 and the MA welcomes AIM’s very helpful statement on the subject.”
To read AIM’s statement in full, click here
Update
21.09.2011
This article was edited to clarify when FRS30 was produced
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