FASB Updates ‘Collection’ Definition

Thoughtware Article Published: Apr 09, 2019
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FASB recently issued an Accounting Standards Update (ASU) that aligns the accounting definition of a “collection” with one of the museum industry’s governing bodies. Museums generally are governed by either the American Alliance of Museums (AAM) or the Association of Art Museum Directors (AAMD). Recent court cases have highlighted that FASB’s “collection” definition is no longer aligned with AAM’s definition. In 1993, when FASB first issued Statement 116, the definitions were aligned. Shortly after issuance, AAM modified its code to allow proceeds from the sale of collections to be used for the acquisition or direct care of collections.

FASB’s collection definition currently is narrower than the AAM definition. Because of this difference, some entities are concerned that if they use the broader AAM collection definition, it may be considered a departure from generally accepted accounting principles (GAAP). Current GAAP states that an entity need not recognize contributions of works of art, historical treasures and similar assets if the donated items are added to collections and meet three conditions noted in the table below. This ASU modifies one condition so proceeds also can be used to support the direct care of existing collections.

The ASU also makes a technical correction to Topic 360, Property, Plant, and Equipment, to clarify that the accounting and disclosure guidance for collections in Subtopic 958-360, Not-for-Profit Entities—Property, Plant, and Equipment, applies to business entities as well as not-for-profit (NFP) entities, consistent with what was indicated in Statement 116.

ASU 2019-03


Although accounting for collections is primarily an NFP issue, this standard is not limited to NFPs. This ASU applies to all entities, including business entities that maintain collections.


Collection-holding entities must disclose their policies for the use of proceeds from deaccessioned (removed) collection items. If a collection-holding entity allows proceeds from deaccessioned collection items to be used for direct care, the entity will be required to disclose what the entity considers direct care.

Effective Date & Transition

The amendments should be applied on a prospective basis and are effective for all entities for annual periods beginning after December 15, 2019, and interim periods after December 15, 2020.

BKD has prepared a library of BKD Thoughtware® on NFP issues. Visit our website to learn more. If you have questions about this standard, contact your BKD advisor.



To address concerns raised by AAMD members or other entities that prefer to permit only the use of sales proceeds to purchase new collection items, FASB clarified that an entity is allowed to apply a narrower policy than the Master Glossary’s definition of collections if the entity determines that the restriction is necessary within its industry or organization. 

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