Q&A discusses ‘direct care’ expenses for collections

By Ken Tysiac

A new Technical Question and Answer (TQA) issued by the AICPA discusses the characteristics of expenses that would be considered “direct care of existing collections” under a new FASB standard that updates the definition of “collections.”

In March, FASB issued Accounting Standards Update No. 2019-03, Not-for-Profit Entities (Topic 958): Updating the Definition of Collections. The standard requires the proceeds of sales from collection items to be used for the acquisition of new collection items, the direct care of existing collections, or both.

Q&A Section 6140.27, Not-for-Profit Entities, Definition of Direct Care of Collection Items, provides nonauthoritative guidance explaining that the term “direct care” is not defined by FASB. The TQA discusses characteristics to consider when determining which costs are considered direct care of collection items.

These characteristics include, but are not limited to, whether those costs:

  • Enhance the life, usefulness, or quality of an entity’s collection;
  • Provide a benefit to the collections (and not the entity as a whole or other areas of the entity beyond the collections); and
  • Exclude expenditures that are regular and ongoing in nature (such as expenditures for routine maintenance of the collection).

Ken Tysiac (Kenneth.Tysiac@aicpa-cima.com) is the JofA’s editorial director.

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