What is the typical treatment for donated works of art in governmental accounting?

In governmental accounting, donated works of art are generally capitalized unless specific exceptions apply. This is based on the idea that these donated assets have a measurable value and can enhance the wealth of the governmental entity. By capitalizing them, the government acknowledges the value of the asset on its financial statements.

Capitalization means that the asset is recorded on the balance sheet rather than expensed immediately, reflecting its value over time and recognizing that it may contribute to the long-term benefits for the municipality or organization. This practice aligns with the intent to faithfully represent the financial position of the government and provide useful information to users of the financial statements.

Exceptions that may apply include cases where the value of the donated asset is not determinable or if it does not meet the criteria for capitalization under relevant accounting standards. Certain donations that consist of collections or cultural heritage items may be treated differently depending on their expected use or preservation requirements. Therefore, the standard approach remains to capitalize, providing an accurate view of the government’s non-current assets.