A not-for-profit museum owns a building and a large collection of art works.Both the building and the art works are capitalized on the entity's statement of financial position.What is the general rule regarding depreciation of the building and the art works?

Question

Quizplus · Accepted Answer

According to the FASB, buildings should be depreciated as they have a limited useful life. However, the art works may be exempt from depreciation if they meet the three criteria established: 1) are held for public exhibition, education, or research in furtherance of public service, 2) are protected, kept unencumbered, cared for, and preserved, and 3) are subject to an organizational policy that requires the proceeds from sales of collection items to be used to acquire other items for collections. If these criteria are met, the art works can be held at historical cost and not depreciated.

A Not-For-Profit Museum Owns a Building and a Large Collection