Accounting for Museums, written by Martha L. Benson, CPA, and Alan S. Glazer, CPA, Ph.D., describes how not-for-profit museums should prepare financial statements and related disclosures in conformity with U.S. generally accepted accounting principles (GAAP). Various recognition, measurement, and disclosure alternatives also are discussed in situations where acceptable alternative accounting principles exist. The Portfolio focuses on areas especially important for museums and describes alternative principles that can be used in certain situations. It is intended to help readers prepare and analyze museums’ financial statements and evaluate choices among alternative U.S. Generally Accepted Accounting Principles. 

After introducing the financial reporting model and GAAP used by museums this Portfolio analyzes accounting for museums’ most important assets—contributions receivable, collections, investments and derivatives, and long-lived tangible assets.  

This Portfolio discusses various aspects related to reporting museums’ operations including contributions received and made, agency transactions, special events, auxiliary activities, advertising, and joint costs.  

Accounting for Museums also discusses the basis for presentation in museums’ financial statements, including how to report measures of operations, the use of fund accounting for internal purposes, accounting for for-profit and not-for-profit related entities, and the preparation of consolidated financial statements. It describes various regulatory, tax, and other requirements and discuss processes museums’ managements and boards can use to assess financial performance and develop financial plans. 

This Portfolio contains numerous examples of the application of accounting principles to transactions that museums typically undertake and illustrates the appropriate recognition, measurement, and disclosure of those transactions.  

The Working Papers included in the Portfolio contain a full set of illustrative financial statements and related notes, as well as various other materials useful in preparing and analyzing a museum's financial statements.  

A comprehensive Bibliography includes the most significant authoritative pronouncements applicable to museums.

Accounting for Museums allows you to benefit from:

• Hundreds of hours of original research on specific tax planning topics from leading practitioners in this area.
• Invaluable practice documents including tables, charts and lists.
• Guidance from world-class experts.
• Real-world and in-depth analysis that lets you explore various options.
• Time-saving access to relevant sections of tax laws, regulations, court cases, IRS documents and more.
• Alternative approaches to both common and unique tax scenarios. 

This Portfolio is included in the Accounting Policy & Practice Series, a comprehensive series of titles which explain, explicate, and offer commentary on a wide range of accounting and financial management topics, including revenue recognition, income taxes, leasing, business combinations, debt instruments, risk management, internal controls and more. 

Detailed Analysis

I. Introduction and Overview of Generally Accepted Accounting Principles

A. Introduction

B. Background

C. The Not-for-Profit Museum Community

D. Users and Uses of a Museum's Financial Statements

E. The Development of U.S. GAAP for Museums

F. Overview of Current GAAP for Museums

1. GAAP Hierarchy

a. Category A

b. Category B

c. Category C

d. Category D

e. Other

2. Not-for-Profit Reporting

G. Basic Financial Reporting Model

1. Introduction

2. Measurement and Recognition Principles

3. Classification Principles

4. Disclosure Principles

H. Alternate Accounting Policies

II. Financial Statement Overview

A. Introduction

B. Statement of Financial Position

1. Assets

2. Liabilities

3. Net Assets

4. Alternative Formats

C. Statement of Activities

1. Revenues

2. Expenses

3. Gains, Losses, and Other Changes in Net Assets

4. Reclassifications

5. Alternative Formats

6. Additional Information About Expenses

D. Statement of Cash Flows

1. Cash Flows From Operating Activities

a. Direct Method

b. Indirect Method

2. Cash Flows From Investing Activities

3. Cash Flows From Financing Activities

4. Other Disclosures

E. Reporting on Collection Items

III. Contributions Receivable

A. Introduction

B. Definitions

C. Unconditional Promises to Give

1. Recognition

2. Measurement and Classification

a. Promises to Give Cash

b. Promises to Give Securities and Other Non-Cash Assets

(1) Changes in Fair Value Subsequent to Initial Recognition

(2) Changes in the Collectibility, Nature, or Quantity of Promised Assets

(3) Changes in the Estimated Fair Value of Promised Assets

(a) Marketable Equity and Debt Securities

(b) Other Assets

D. Disclosures

IV. Collections

A. Introduction

B. Definitions

C. Alternate Accounting Methods

1. Capitalized Collections

a. Recognition

(1) Capitalization of Collections Amassed Before the Capitalization Date (for Museums Electing Retroactive Capitalization)

(2) Recognition of Changes in Collections After Capitalization Date (for Museums Electing Retroactive or Prospective Capitalization)

b. Classification

c. Disclosures

2. Collections Not Capitalized

a. Recognition

b. Measurement

c. Classification

d. Disclosures

V. Investments and Derivatives

A. Introduction

B. Definitions

C. Recognition and Measurement

1. Cash and Cash Equivalents

2. Securities Held for the Benefit of Others

3. Investments in Debt Securities and in Equity Securities With Readily Determinable Fair Values and No Significant Influence or Control

4. Investments in Entities When Significant Influence Exists

5. Investments in Entities When Control and Economic Interest Exist

6. Derivative Financial Instruments

7. Other Investments

D. Classifying Changes in Net Assets Arising From Contributed Securities

E. Disclosures

VI. Long-Lived Tangible Assets and Depreciation

Introductory Material

A. Recognition and Measurement of Long-lived Tangible Assets

1. Contributions With Explicit Donor Restrictions

2. Contributions Without Explicit Donor Restrictions

a. Unrestricted Revenue

b. Implied Time Restriction

B. Depreciation

1. Introduction

2. Accounting for Depreciation

a. Recognition

b. Measurement

c. Classification

C. Leases and Similar Agreements to Use Long-Term Tangible Assets

D. Disclosures

VII. Contributions Made

A. Introduction

B. Accounting for Unconditional and Conditional Contributions Made

1. Recognition

2. Measurement

3. Classification

4. Disclosures

VIII. Contribution Revenue

A. Introduction

B. Definitions

C. Contributions and Exchange Transactions

1. Differentiating Between Contributions and Exchange Transactions

2. Accounting for Contributions vs. Exchange Transactions

D. Contributions as a Component of Membership Dues

E. Contributions and Agency Transactions

F. Accounting for Contributions Received

1. Unconditional Contributions of Cash and Other Assets

a. Recognition

b. Measurement

c. Classification

d. Disclosures

2. Conditional Contributions of Cash and Other Assets

a. Recognition

b. Measurement

c. Classification

d. Disclosures

3. Unconditional Promises to Give

a. Recognition

b. Measurement

(1) Long-term Promises to Give Cash

(2) Promises to Give Investments and Other Non-Cash Assets

c. Classification

d. Disclosures

4. Conditional Promises to Give

a. Recognition

b. Measurement

c. Classification

d. Disclosures

5. Intentions to Give

6. Contributions of Collection Items

7. Split-Interest Agreements and Similar Arrangements

a. Recognition

b. Measurement

(1) At Initial Recognition

(2) During the Term of the Agreement

(3) At Termination

c. Classification

d. Disclosures

8. Contributed Services

a. Recognition

b. Measurement

c. Classification

d. Disclosures

9. Contributed Facilities and Utilities

a. Recognition

b. Measurement

c. Classification

d. Disclosures

10. Gifts-in-Kind

a. Recognition

b. Measurement

c. Classification

d. Disclosures

11. Forgiveness of Debt and Loans Received at Below-Market Rates

a. Recognition

b. Measurement

c. Classification

d. Disclosures

IX. Agency Transactions: Transfer of Assets Through an Intermediary, Agent, or Trustee

A. Introduction

B. Definitions

C. Accounting for Transfers Through an Intermediary, Trustee, or Agent

1. Recognition

a. Transfers Involving Unrelated Parties

b. Non-Equity Transfers Involving Financially-Related Entities

c. Equity Transfers

2. Measurement

3. Classification

4. Disclosures

5. Summary

X. Special Events

A. Introduction

B. Definitions

C. Accounting for Special Events

1. Recognition

2. Measurement

3. Classification

4. Disclosures

XI. Auxiliary Activities

A. Introduction

B. Definitions

C. Accounting for Auxiliary Activities

1. Recognition

2. Measurement

3. Classification

4. Disclosures

XII. Expense Classification and Allocation

A. Introduction

B. Statement of Activities

C. Disclosures

1. Allocation of Overlapping Indirect Costs

D. Reporting the Results of Fundraising Activities

XIII. Advertising Activities

A. Introduction

B. Definitions

C. Accounting for Advertising Costs

1. Recognition

2. Measurement

3. Classification

4. Disclosures

XIV. Joint Costs: Accounting for Activities that Include Fundraising

A. Introduction

B. Definitions

C. Accounting for Joint Costs

1. Recognition

2. Measurement

3. Classification

a. Purpose Criterion

b. Audience Criterion

c. Content Criterion

d. Allocation Methods

(1) Physical Units Method

(2) Relative Direct Cost Method

(3) Stand-Alone Joint-Cost-Allocation Method

(4) Choosing Appropriate Allocation Methods

e. Incidental Activities

4. Disclosures

XV. Reporting Operating Measures

A. Introduction

B. Alternative Disclosure Policies

XVI. Fund Accounting

A. Introduction

B. History and Definitions

C. Fund Accounting vs. Accounting for Net Asset Classes

D. Converting Fund Accounting to a Net Asset Class Presentation

XVII. Related Entities and Consolidated Financial Statements

A. Related Entities

1. Introduction

2. Related For-Profit Entities

3. Related Not-for-Profit Entities

a. Control Through Majority Voting Interest or Majority of Governing Board Positions

b. Other Sources of Control

c. Control or Economic Interest

4. Disclosures

5. FASB Statement Nos. 160 and 141(R) and FASB Interpretation No. 46(R)

B. Preparation of Consolidated Financial Statements

C. Acquiring Control of Other Entities

1. Introduction

2. Current GAAP

3. FASB Project on Accounting for Combinations by Not-for-Profit Organizations

a. Background

b. Types of Combinations

c. Identifying the Acquiring Entity

d. Collection Items Acquired in a Combination

e. Required Disclosures

XVIII. Tax, Regulatory, and Other Reporting Requirements

A. Introduction

B. IRS Reporting Requirements

1. Filing for Federal Tax-Exempt Status

2. Annual Returns

a. Forms 990 and 990-EZ

(1) Information about Revenues, Expenses, and Changes in Net Assets

(2) Reconciliations of Revenues and Expenses to Audited Financial Statements

(3) Analysis of Income-Producing Activities

(4) Major Sources of Support

(5) Statement of Functional Expenses

(6) Major Program Services

(7) Balance Sheets

(8) Compensation, Lobbying, and Insider Transactions

(9) List of Major Contributors

b. Form 990-T

3. Excess Benefits Transactions

C. State and Local Government Reporting Requirements

D. Public Disclosure of Tax Filings

E. Audited Accounting Information Provided to Other Government Agencies and Other Interested Parties

XIX. Financial Planning and Analysis

A. Introduction

B. Objectives

C. A Process for Assessing a Museum's Financial Performance and Developing Financial Plans

1. Analyzing the Current Operating Environment

2. Evaluating the Current Financial Situation

a. Comparisons Over Time (Time-Series Analysis)

b. Common-Size Financial Statements

c. Ratio Analysis

d. Comparing Actual with Budgeted Figures

e. Comparing Resources With Mission

f. Peer Benchmarking

g. Watchdog Agencies' Analyses and Accountability Standards

(1) Charities Review Council of Minnesota

(2) Charity Navigator

(3) Other Watchdog Organizations

h. Debt Ratings

i. Matching Funding Sources and Costs

j. Compensation

3. Assessing Potential Changes in the Operating Environment

4. Developing Financial Plans

Working Papers

TABLE OF WORKSHEETS

Worksheet 1 Illustrative Statements of Financial Position

Worksheet 2 Illustrative Statements of Activities

Worksheet 3 Illustrative Statements of Cash Flows

Worksheet 4 Illustrative Notes to the Financial Statements

Worksheet 5 Technical Practice Aids Applicable to Museums

Worksheet 6 Hierarchy of U.S. Generally Accepted Accounting Principles

Worksheet 7 Alternative Accounting Policies

Worksheet 8 Chart of Accounts

Worksheet 9 IRS Form 1023, "Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code"

Worksheet 10 IRS Form 990-EZ, "Short Form Return of Organization Exempt from Income Tax"

Worksheet 11 IRS Form 990, "Return of Organization Exempt from Income Tax"

Worksheet 12 IRS Form 990-T, "Exempt Organization Business Income Tax Return"

Worksheet 13 State of Minnesota, Charitable Organization Registration Statement

Worksheet 14 Sample Financial Accountability Standards of Various Watchdog Organizations

Worksheet 15 Sample Report from Charities Review Council

Worksheet 16 Sample Report from Charity Navigator

Worksheet 17 Sample Information from GuideStar

Worksheet 18 Description of Cited Web Sites

Worksheet 19 List of Significant Accounting Pronouncements Principally Discussed

Bibliography

OFFICIAL

American Institute of Certified Public Accountants:

Accounting Research Bulletins

Accounting Principles Board Opinions

Accounting Standards Executive Committee

Auditing Standards Board Statements

Financial Accounting Standards Board:

Statements of Financial Accounting Standards

Current Text

FASB Interpretations

Concepts Statements

FASB Staff Positions

Exposure Drafts of Proposed Statements of Financial Accounting Standards

Consensus of the Emerging Issues Task Force

Internal Revenue Code Sections

Internal Revenue Service

U. S. Office of Management and Budget

U.S. Treasury Regulations and Rulings

UNOFFICIAL

BNA Tax Management Portfolios

Books and Periodicals