In Short: Many museums do not put a money value on their collections at all. Items held for public display, study and preservation are often treated as special heritage assets, and accounting rules in several countries allow museums to leave them off the balance sheet, as long as they explain the collection in the notes to their accounts. Where values are recorded, they are usually based on the purchase price or on a value at the time an item was donated, not on today’s market price.
A large museum may hold paintings, sculptures, fossils and historic objects worth enormous sums. Some pieces are so famous that they are often described as priceless. That raises a practical question for the accountants who prepare the museum’s financial statements: how do you record something that has no real price, and that the museum may never be allowed to sell?
The answer is one of the most unusual areas of accounting.
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What Makes a Heritage Asset Different
Most assets are held because they help a business earn money. A delivery company owns vans to deliver parcels. A factory owns machines to make products.
Museum collections are different. They are kept mainly for their cultural, historical, artistic or scientific value, and for the benefit of the public. Accountants call items like these heritage assets.
Heritage assets usually have a few features in common:
- they are unique or very rare, so there is often no market price to compare them with
- the museum may be legally or ethically restricted from selling them
- they are expected to be preserved for a very long time, often forever
- their value to society cannot be fully measured in money
Each of these features creates a problem for normal accounting methods.
The Problem With Putting a Price on the Priceless
Imagine a museum trying to value an ancient manuscript. There may be no similar item that has ever been sold. Experts could suggest a figure, but different experts might give very different answers. The museum would also need to repeat this for every object in its collection, which could mean millions of items, including tiny fossils, coins and documents.
The cost of professional valuations on that scale would be huge, and the results would still be uncertain. Many accountants argue that spending large amounts of public or donated money to produce shaky numbers does not help anyone who reads the accounts.
There is also a question of purpose. A balance sheet helps readers understand the resources an organization can use to meet its obligations. If a museum cannot sell its collection to pay its bills, a large value on the balance sheet could give a misleading picture of its financial strength.
How the Rules Handle It
Different countries and types of organizations follow different accounting rules, but most offer museums some flexibility for collections. In practice, museums tend to follow one of three approaches:
| Approach | What it means | When it is used |
|---|---|---|
| Record at cost or value | Collection items appear on the balance sheet at their purchase price or at a valuation | When reliable information is available at reasonable cost |
| Record only newer items | Recent purchases and donations are recorded, but older items with no known cost are left off | Common where historical records are incomplete |
| Do not record, but disclose | Collection items are left off the balance sheet, and the notes describe the collection and how it is managed | Allowed under certain rules when strict conditions are met |
In the United States, accounting rules for nonprofit organizations allow collections to stay off the balance sheet if the items are held for public exhibition, education or research, are protected and cared for, and if money from any sale is used for approved purposes, such as buying other collection items. Many American museums choose this option.
In the United Kingdom, rules for heritage assets generally expect them to be recognized when information about their cost or value is available. If obtaining that information is not practical, especially for older collections, the assets can be left off, but the museum must provide detailed information about the collection instead.
What Happens When an Item Is Donated
Museums receive many of their objects as gifts from private collectors. If a museum records its collection on the balance sheet, a donated item is usually recorded at its fair value at the time of the gift, since there is no purchase price. That value often comes from an expert valuation.
If the museum does not record collections on the balance sheet, the donation still appears in the museum’s records and may be described in the notes, but it does not create an asset in the main financial statements.
Do Collections Lose Value Over Time?
Most assets, like computers and vehicles, are depreciated, meaning their cost is spread over their useful lives. Heritage assets are usually not depreciated. The reason is that museums work to preserve them indefinitely. A properly cared-for painting is expected to last for centuries, so there is no clear useful life to spread its cost over.
Instead, the money museums spend on conservation, climate control and restoration is generally treated as a normal expense.
Insurance Values Are a Separate Matter
Museums often insure their collections, especially items that travel to other museums for exhibitions. Insurance values can be very large, but they are not the same as accounting values. An insurance value is an estimate of what it would cost to cover a loss. It is used for protection, not for the balance sheet.
When Museums Sell Items
Museums sometimes remove items from their collections, a process called deaccessioning. There may be good reasons, such as duplicates, damaged objects or items that no longer fit the museum’s purpose.
Selling collection items is a sensitive topic. Professional museum associations have ethical guidelines that usually say sale money should be used to buy new collection items or to care for the existing collection, not to pay everyday running costs. Cases where museums sold famous works to solve money problems have caused strong public debate, including a well-known case in 2018 when a small American museum sold paintings by Norman Rockwell.
When a sale happens, the money received is recorded in the accounts, and the notes usually explain what was sold and how the money will be used.
Frequently Asked Questions
Do museums have to show a value for every object? No. Depending on the rules they follow, many museums can leave some or all of their collection off the balance sheet, as long as they explain it in the notes.
Why not just use auction prices? Many items have never been sold and have no comparable sales. Even for those that have, prices change constantly, and the museum may not be allowed to sell anyway.
Is the rest of a museum’s accounts normal? Yes. Buildings, equipment, ticket income, grants, staff costs and shop sales are recorded in the usual way.
A Different Kind of Wealth
Museum accounting shows that not every valuable thing fits neatly into a balance sheet. For a business, assets are tools for making money. For a museum, the collection is the whole reason the organization exists, and it is held in trust for the public. That is why accounting rules give museums room to describe their treasures in words, rather than forcing a price onto objects whose real value lies in history, knowledge and culture.