[BCMA] Accounting Question

Wed Mar 11 10:06:39 PDT 2020

Whether it is asked for or not by CRA, it is good curatorial practice to have an itemized valuation of the holdings of the collection for insurance purposes. This is really not a change, but is becoming more tightly observed by CRA. If you've regularly observed option #2, then you should be in good shape, and you just need to show the cumulative value adding items obtained in the current fiscal.

Typically, valuation is done by the curator up to a certain dollar figure, with valuation of items over that mandated dollar figure being done by a third party. Like everything else, that figure goes up over time, so items acquired in 1983 could be valued up to $500, while in 2018, the value could be up to $1000. If you have a nominal value assessed for income tax purposes at the time of acquisition, that is the value of the item which is considered part of the holdings from CRA's perspective. There is an allowance for a nominal percentage value increase of that item over time. What CRA wants to be aware of is whether a collection, or an item in the collection was valued at $900 at time X, but it was really worth $9000. An organization may not show the true value to materially leverage the value of their holdings for financial considerations. Should the item then be sold at the inflated value, what does that mean to the tax exempt status of the organization? Did the organization knowingly acquire an item at far below the asset value, and did they act ethically in the acquisition of the item? Should the item lose value, was the original value done for tax sheltering purposes by the donor? Good financial records and proper tracking of a collection's value would answer those questions more reliably in any

CRA also acts as a monitoring body for instances where a collection should suddenly increase in value. For example, should the collection have early works of an artist who acquires significant reputation, the organization may wish to seek funding to protect/display/ otherwise use the items. An accurate valuation could help secure the funding, and if the collection is significant enough, CRA may look at protection of what is a communal trust asset if it is in a public institution.

It would also help in questions of estate disputes. Let's suppose Mr. McGillicuddy, who is 94, donates a work which is valued at X. Mr. McGillicuddy's children, upon his passing, feel that the item was obtained by the museum under duress, and they feel the item was undervalued. They are seeking damages. They may want to recover the item for the family. CRA may want to know if the organization was aware of the value question, and how did they do their due diligence in valuation.

Darryl MacKenzie | Curator, Delta Cultural Services
Parks, Recreation and Culture | The City of Delta
p. 604.952.3837| c. 778.231.0504

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Subject: [BCMA] Accounting Question

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Hi friends ...

I am wondering if anyone else has been told by their accounting firms that as of 2019 Museums and Galleries now have to account for the value of their permanent collections when doing their yearend?

We were told we have three options:

1) get the whole collection appraised
2) include the value of all the tax receipts given and purchases made
3) provide a nominal value per item and multiply the entire value by the number of items in the collection.

I am wondering if anyone else has heard of this change and if so what are the thoughts of the community as we have never accounted for the value of our permanent collection on our books previously.

Thank you for your time and input.

I look forward to your reply.
Paul F. Crawford
Director/Curator
Penticton Art Gallery
199 Marina Way
Penticton, B.C.
V2A 1H5 Canada
Phone: (250) 493-2928<tel:%28250%29%20493-2928>
Email: curator at pentictonartgallery.com<mailto:curator at pentictonartgallery.com>
Web: www.pentictonartgallery.com<http://www.pentictonartgallery.com/>

On the unceded territory of the Syilx (Okanagan) Peoples.

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