Not for profit accounting-Fair value

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  • #190349 Reply

    Dear all, please help with a question about fair value treatment in non-profit accounting.

    If someone donates an artwork to a museum (FV 1million), after one year, the FV decreased to 0.9million.

    Per my understanding, when the donation is made, the museum should record the asset in fair value:

    Debit: Asset 1million

    Credit: Contribution-support 1million

    Does the museum do anything to recognize the fair value decrease? I remember per Becker review, donations should be recorded at fair value, however, there is no specific clauses on how to deal with the fair value change.

    #619955 Reply

    My understanding depends on what the intent of obtaining the artwork is. If the artwork is obtained for the sole purpose of appreciating in value and making money on the sale, you treat the artwork in the same manner as common stock since it is essentially the same thing. If the artwork is obtained solely for artistic display and preservation with no intent to sell, no adjustments are made to reflect fair value increases/decreases.

    #2822934 Reply
    BEC Savvy

    How are works of arts initially recognized? can someone provide the relevant codification reference?

    #2823039 Reply

    Initially at FV and after at FV. I'm not 100% sure, but I remember I had the same problem. By the way If someone donates an artwork to a museum it should be capitalized or expensed and you need to know when to capitalize and when you can expense.

    FAR - 73, 78 (WileyCPAexcel 3,000+ MCQs, 50 SIMs)
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    "Of course it’s hard. It’s supposed to be hard. If it was easy, everyone would do it. Hard is what makes it great."

    #2823093 Reply
    BEC Savvy

    What is the citation for this conclusion? I feel a bit lost in the NPOs citations. Thanks so much!

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