The Conceptual Framework, Museum Collections, and User-Oriented Financial Statements

One of the most controversial aspects of developing accounting standards for not-for-profit organizations has been how to recognize their tangible economic resources. In October 1990, the Financial Accounting Standards Board (FASB) issued an exposure draft that would require museums, with certain limited exceptions, to capitalize their collections and to recognize current-period contributions of collection items as revenues. The conceptual issues concerning accounting by museums is analyzed. Whether the FASB goes forward with its proposed collection recognition requirements will depend, in part, on how the Board applies 4 recognition criteria - definitions, measurability, relevance, and reliability. Because the conceptual analyses of these issues are likely to remain inconclusive, the FASB's decision with respect to collection will rest largely on whether it believes that recognizing collection items passes a cost-benefit test.