FASB Revises Collections Definition
Last month, the Financial Accounting Standards Board (“FASB”) finalized new guidance that updates its definition of “collections” to be aligned with the definition used by the American Alliance of Museums. In Accounting Standards Update (“ASU”) No. 2019-03, Not-for-Profit Entities (Topic 958): Updating the Definition of Collections, the FASB states that proceeds from the sale of collection items (i.e., historical artifacts, art groupings) can be used to obtain new items or maintain existing items in possession. The previous definition restricted proceeds to be used only for acquiring additional collections. Nonprofits like museums and libraries are likely to be impacted by the new guidance.
The standard can be applied to annual financial statements issued for fiscal years, and interim periods within those years, starting after December 15, 2020. Early application is allowed.