Should Museums Record Art Collections as Assets?

Article Summary

• U.S. GAAP (ASC 958-360) allows museums an accounting policy choice to capitalize or not capitalize qualifying collections, provided specific criteria are met and the policy is applied consistently and clearly disclosed.
• Most museums elect not to capitalize collections because they are held in the public trust, not for financial gain, and capitalization can create valuation challenges, added audit complexity, and misleading perceptions about monetization.
• Disclosure is still required even if collections are not capitalized, including the nature of the collections, stewardship practices, and deaccession policies, ensuring transparency without assigning potentially misleading dollar values.
  
  

Should Museums Record Art Collections as Assets?

February 17, 2026

For nonprofit museums, the question of whether to recognize collections of art as assets frequently arises during audits, strategic planning discussions, or when new board members review the organization’s financial statements for the first time. While the answer may seem straightforward, U.S. GAAP gives museums a unique accounting policy choice that reflects the distinct mission‑driven nature of collections.

Understanding the Accounting Policy Choice Under U.S. GAAP

For museum‑type nonprofits, collections are often the most visible and mission‑critical resources they hold. Works of art, historical artifacts, and cultural treasures are central to why these organizations exist. Yet despite their significance—and sometimes enormous monetary value—many museums do not record their collections as assets on the balance sheet.

This can be confusing for board members, donors, and other stakeholders who naturally assume that something so valuable should appear in the financial statements. Under U.S. generally accepted accounting principles (U.S. GAAP), however, collections are treated differently from typical assets like buildings or equipment.

What Counts as a “Collection” Under U.S. GAAP?

U.S. GAAP (primarily ASC 958‑360) provides specific guidance for “works of art, historical treasures, and similar items” held by not‑for‑profit organizations.

To be treated as a collection, items must meet three criteria. First, the items must be held for public exhibition, education, or research in furtherance of public service, rather than for financial gain. Second, the items must be protected, cared for, and preserved. Third, the items must be subject to a formal policy that requires proceeds from any items sold (deaccessioned) to be used to acquire other collection items or for the direct care of existing collections.

When these conditions are met, the items are viewed as being held in furtherance of the organization’s mission, not primarily as financial or investment assets.

Capitalize or Not? The Accounting Policy Election

U.S. GAAP does not require museums to capitalize qualifying collections. Instead, organizations make an accounting policy election, within the framework of ASC 958‑360. Broadly, a museum can:

1)    Not capitalize its collections at all (the most common approach)
2)    Capitalize all qualifying collection items
3)    Capitalize prospectively, meaning only items acquired after a specified date are recorded as assets, when historical cost information is not practicably determinable

Whatever policy is chosen must be:

1)    Applied consistently
2)    Described clearly in the notes to the financial statements
3)    Justifiable under U.S. GAAP

In practice, most museums elect not to capitalize their collections, even when those collections are substantial. This is explicitly permitted under U.S. GAAP and is widely accepted in the nonprofit and museum communities.

Why Many Museums Choose Not to Capitalize Collections

1. Public Trust vs. Financial Assets

Museum collections are generally held in the public trust, not as resources to be sold to fund operations, repay debt, or serve as collateral. Donors and the public typically expect that collection items will be preserved and used for exhibition, education, or research.

When collections are recorded as balance sheet assets, it can create the impression that they are available to be liquidated in times of financial stress or, like other assets, can be sold or pledged.

That perception often runs counter to professional museum ethics and donor expectations.

2. Practical Valuation Challenges

Valuing collections can be:

1)    Costly – requiring appraisals or specialist input
2)    Time‑consuming – especially for large or diverse collections
3)    Highly subjective – many items are unique, rarely traded, or irreplaceable

Once capitalized, collections may also require:

1)    Periodic updates or additional valuation work
2)    More extensive audit procedures
3)    Expanded and more complex disclosures

For many organizations, the cost and effort of capitalization outweigh any perceived benefits, particularly when the resulting dollar amounts do not materially improve decision‑making or transparency for key users of the financial statements.

When Capitalization Might Make Sense

Capitalization is not inherently wrong. In some circumstances, it can be appropriate or even required.

Items held primarily for investment purposes (for example, artwork purchased to generate returns rather than for exhibition or education) are generally accounted for as investments, not as collections. These should be measured in accordance with investment accounting guidance (e.g., ASC 958‑320), not the collections’ guidance.

Some organizations may conclude that capitalizing collections provides more useful information to lenders, rating agencies, or other financial statement users, or aligns better with long‑term financial strategy or internal reporting

U.S. GAAP also acknowledges that certain capitalized collection items may have extraordinarily long useful lives. In those cases, it may be appropriate not to record depreciation, which further distinguishes them from traditional property and equipment. However, organizations still need to consider impairment if there is a loss in service potential.

Any move into or out of capitalization is a change in accounting principle and must be evaluated and disclosed under the relevant guidance (ASC 250), including how the change is applied and why it is preferable.

Disclosure Requirements When Collections Are Not Capitalized

Even when a museum elects not to capitalize its collections, U.S. GAAP still requires meaningful disclosure. At a minimum, financial statements should describe:

1)    The nature of the collections
2)    The organization’s policy for collections (including the fact that qualifying collections are not capitalized)
3)    How collections are cared for and preserved
4)    The organization’s policy for the use of proceeds from deaccessions (e.g., that proceeds are used to acquire other collection items or for the direct care of existing collections)

These disclosures enable readers to understand the significance of the collections and the organization’s stewardship responsibilities, without assigning a potentially misleading dollar value to them.

How Should a Museum Decide?

There is no single “right” answer that applies to all museums. The decision to capitalize collections is an accounting policy decision that should be made thoughtfully. This decision can be made based on input from management and the finance team, oversight by the board or audit/finance committee, or advice from professional auditors or accounting advisors.

Key factors to consider include:

1)    The organization’s mission and ethical responsibilities
2)    Donor and public expectations around stewardship and monetization
3)    The informational needs of financial statement users (e.g., lenders, regulators, rating agencies)
4)    The cost‑benefit of obtaining and maintaining valuations
5)    The implications of any change in accounting principle

Ultimately, the best policy is the one that complies with U.S. GAAP, aligns with the organization’s mission and ethical commitments, provides useful information to the people who rely on the financial statements, and clearly explains how the museum fulfills its role as a steward of cultural and historical treasures.

Frequently Asked Questions About Recording Art Collections as Assets For Museums

Are museums required to record art collections as assets under U.S. GAAP?
No. Under ASC 958-360, museums are permitted—but not required—to capitalize qualifying collections. They may elect not to record them as assets if GAAP criteria are met.

What qualifies as a “collection” under U.S. GAAP?
To qualify, items must:
Be held for public exhibition, education, or research (not financial gain)
Be protected and preserved
Be subject to a policy requiring proceeds from deaccessions to be used to acquire other collection items or for direct care of collections

Why do many museums choose not to capitalize collections?
Museums often avoid capitalization because collections are held in the public trust, valuation can be costly and subjective, and capitalization may create misleading impressions about monetization.

When should museum collections be capitalized?
Capitalization may be appropriate when items are held primarily for investment purposes or when management determines capitalization provides more useful information to lenders or financial statement users.

What disclosures are required if collections are not capitalized?
Financial statements must disclose:
The nature of the collections
The policy not to capitalize
How collections are preserved
How proceeds from deaccessions are used