Read the following extract:

Museum and art gallery annual general-purpose financial reports may amount to misrepresentations if they include heritage and art collections that are not assets, as defined by the Australian Accounting Standards.

The Australian accounting profession defined an asset in the conceptual framework so that when financial reports are prepared, only those things that meet the requirements can be included. There are two decisions: definition and recognition by valuation.

Defining an asset
Accountants know that an asset is a representation of ‘future economic benefits’ that must be accruing to the organisation that prepares the financial reports. That is, for the purposes of the financial reports, any argument that there will be ‘future economic benefits’ to the community at large is irrelevant.

Certainly, public heritage collections have a number of future benefits for individuals and the community generally, but is there any future benefit deriving from the collections which is economic to the museum?

The ‘future economic benefits’ . . . are the income received from admission fees, other user pays fees, grants and sponsorship. However, these are discounted for various reasons, including the fact that the value of the receipts is a minimum and variable measure of the benefits flowing from the overall operation of a museum. The collections do not generate museums’ net revenues — rather, it is a package of services offered by a museum or gallery that is the chief generator.

Even if a museum can argue that its collections are representations of ‘future economic benefits’ as per the definitions in the accounting standards, the question of whether it is probable that the ‘future economic benefits’ will eventuate must be asked. If museums can find any ‘future economic benefits’, can they list the ‘future economic benefits’ of their collections with any degree of certainty? Is it valid to use current or past data to provide evidence of a future benefit? Can conjecture be evidence? No, of course not.

Yet this is what the accounting profession seems to be encouraging as a result of the writing of the conceptual framework and accounting standards . 

The ‘future economic benefit’ is only an asset if the museum controls that ‘future economic benefit’. Control ‘means the capacity of the entity to benefit from the asset in the pursuit of the entity’s objectives and to deny or regulate the access of others to that benefit’.

The conceptual framework is very clear that it is control, not ownership, which is a defining characteristic of an asset . . .

Required

Discuss whether museum and art collections should be recognised as assets on the statement of financial position/balance sheet of a public museum. Do you agree with Tyzack? Why or why not?