The following table identifies the changes made to this Subtopic.
This Subtopic provides guidance about long-lived tangible assets held by
not-for-profit entities (NFPs).
It includes standards of financial accounting and reporting that require all NFPs to recognize the cost of using up long-lived tangible assets—depreciation—in financial statements. This Subtopic follows the same Scope and Scope Exceptions as outlined in the Overall Subtopic, see Section
958-10-15.
Property, plant, and equipment acquired by
contribution is recognized in accordance with the Contributions Received Subsections of Subtopic
958-605.
However, a not-for-profit entity (NFP) need not recognize contributions of works of art, historical treasures, and similar assets if the donated items are added to collections (see the following paragraph and paragraph 958-360-25-3). Works of art, historical treasures, and similar items that are not part of a collection shall be recognized as assets in financial statements.
An NFP that holds works of art, historical treasures, and similar items that meet the definition of a collection has the following three alternative policies for reporting that collection:
- a
Capitalization of all collection items
- b
Capitalization of all collection items on a prospective basis (that is, all items acquired after a stated date)
- c
No capitalization.
Capitalization of selected collections or items is precluded. Similar to items acquired in exchange transactions, the amount initially recognized for contributed property, plant, and equipment shall include all the costs incurred by the entity to place those assets in use. Examples of such costs include the freight and installation costs of contributed equipment and cataloging costs for contributed library books.
The process of using up the future economic benefit or service potential of land often takes place over a period so long that its occurrence is imperceptible—land used as a building site is perhaps the most common example. In contrast, however, that process also sometimes occurs much more rapidly—land used as a site for toxic waste, as a source of gravel or ore, or for farming under conditions in which fertility dissipates relatively quickly and cannot be restored economically are examples.
A recognized cultural, aesthetic, or historical value and, generally, an already long existence have established each work of art or historical treasure as a member of a group of rare works with that characteristic. Most of them are acquired by purchase, gift, or discovery with that characteristic already having been demonstrated, and the holder or acquirer usually takes steps to protect and preserve it, for example, by keeping a work of art in a protective environment and limiting its use solely to display. While that characteristic is not limited to assets with an already long existence, an asset that has come into existence relatively recently cannot be assumed to have it in the absence of the verifiable evidence described in the preceding paragraph. For example, to put a painting in a protective environment is not by itself evidence of cultural, aesthetic, or historical value that is worth preserving perpetually.
Depreciation shall be recognized on any capitalized costs of major preservation or restoration devices or efforts, which provide future economic benefits or service potentials until the next expected preservation or restoration, regardless of whether depreciation is recognized on the asset being protected or restored.
The terms of certain grants and reimbursements from other entities may specify whether depreciation or the entire cost of the asset in the year of acquisition should be included as a cost of activities associated with those grants or reimbursements for contractual purposes (sometimes referred to as allowable costs). Those terms shall not affect the recognition and measurement of depreciation for financial reporting purposes.
A contribution made by an NFP of a previously unrecognized collection item shall not be recognized on the face of the financial statements.
The amount capitalized for works of art, historical treasures, and similar assets that do not meet the definition of a collection shall be disclosed separately on the face of the statement of financial position or in the notes.
Example 1 (see paragraph
958-360-55-2) illustrates a statement of activities that satisfies the requirements in paragraph
958-360-45-5.
For example, the following information shall be provided: - a
Property, plant, and equipment pledged as collateral or otherwise subject to lien
- b
Donor or legal limitations on the use of or proceeds from the disposal of plant, property, and equipment
- c
Property, plant, and equipment acquired with restricted assets if title may revert to another party, such as a resource provider
- d
The terms of exchange transactions (other than lease transactions), such as federal contracts, in which the resource provider retains legal title during the term of the arrangement but it is probable that the NFP will be permitted to keep the assets when the arrangement terminates.
(P) December 16, 2026; (N) December 16, 2026
105-10-65-10For example, the following information shall be provided: - a
Property, plant, and equipment pledged as collateral or otherwise subject to lien
- b
Donor or legal limitations on the use of or proceeds from the disposal of plant, property, and equipment
- c
Property, plant, and equipment acquired with restricted assets if title may revert to another party, such as a resource provider
- d
An NFP that does not recognize and capitalize its collections or that capitalizes collections prospectively shall describe its collections, including their relative significance, and its stewardship policies for collections. If collection items not capitalized are deaccessed during the period, it also shall describe the items given away, damaged, destroyed, lost, or otherwise deaccessed during the period or disclose their fair value.
A collection-holding NFP shall disclose its organizational policy for the use of proceeds from deaccessioned collection items, including whether those proceeds could be used for acquisitions of new collection items, the direct care of existing collections, or both. If the collection-holding entity allows proceeds from deaccessioned collection items to be used for direct care, the entity shall disclose its definition of direct care.
This Section, which is an integral part of the requirements of this Subtopic, provides general guidance to be used by a
not-for-profit entity (NFP) in reporting property, plant, and equipment.
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Organization M Statement of Activities \" For the Year Ended June 30, 20X1\"\tWithout Donor Restrictions With Donor Restrictions Total Revenues and other support XXX\tXXX\tXXX Gain on sale of art that is not held in a collection 1 1 Net assets released from restrictions\tXXX\t(XXX) \"Total revenues, gains, and other support\" XXX XX XXX Expenses XXX XXX Change in net assets before changes related to collection items not capitalized XX XX XXX Change in net assets related to collection items not capitalized:\tProceeds from sale of collection items 5 10 15 Proceeds from insurance recoveries on destroyed collection items 1 1 Collection items purchased but not capitalized (12) (25) (37) (7) (14) (21) Change in net assets XX XX XXX