FASB Statement No. 93 requires all not-for-profit organizations to compute and report depreciation expense in their external financial statements. Previously, many not-for profits, including many religious institutions, did not report depreciation expense. Many users and preparers of financial statements for religious institutions were upset about the idea of depreciating churches. Robert Anthony, a well-known professor of accounting at Harvard University, was quoted as saying, “Depreciating cathedrals and churches is stupid.” Monsignor Austin Bennett of Brooklyn claimed that the rule would cause “more trouble for American churches than all the sinners in their congregations.” Robert K. Mautz in “Monuments, Mistakes and Opportunities,” Accounting Horizons, June 1988, argued that buildings and monuments owned by governments and not-for-profit institutions may be more liabilities than assets because no revenue is generated from them, but they must be maintained.
Consider the following questions.
1. Why do churches prepare external financial statements?
2. It is claimed that requiring churches to record depreciation expense will increase the cost of a church’s annual audit. How?
3. One person was quoted in The Wall Street Journal as saying, “As some . . . communities change in character, so does the value of the churches. Our depreciation values would have to change every year.” Evaluate this comment.