When you can’t value the priceless

We’ve previously looked at the benefits of recognising heritage assets in financial statements. But what happens when you can’t confidently assign a dollar value to an asset? Lincoln Butler from our Accounting and Auditing Policy Team walks us through some options.

Kiwi and turtle In January 2018, we published a blog post about heritage assets and why auditors take great interest in how these assets are valued and represented in financial statements. In that post, we talked about some of the benefits of why museums, galleries, and other organisations tasked with looking after some of our most precious taonga should include these assets in their financial statements. However, we recognise that sometimes this is a difficult and near-impossible task.

In this blog, we discuss:

What is a reasonable attempt to value heritage assets? and
How do you report unvalued heritage assets in the financial statements?

What is a reasonable attempt to value heritage assets?

The accounting standards say that the value of heritage assets should be reported in the financial statements.

It’s uncommon that an auditor will accept that heritage assets cannot be assigned a dollar value. However, auditors are not experts in valuing heritage assets and do accept that, in some cases, it might be wrong to put a dollar value on cultural heritage assets.

If you feel that you can’t value some or all of your heritage assets and you can show that you’ve considered all the appropriate valuation options, your auditor might agree with your position that a different disclosure is okay.

Things you might consider include:

Value as many heritage assets that you are reasonably able to. Showing that you can’t value one type of heritage assets does not mean you can’t value other types of heritage assets.

Group your heritage assets into collections for valuation purposes, valuing many similar small items as part of an overall collection instead of each item individually.

Attempt to obtain a dollar value for the heritage assets for the financial year under audit. You can’t simply rely on attempts from previous years because new valuation information may be available. You might be able to ask an external valuer whether they have any new information, or look at worldwide auctions or marketplaces or detailed valuations prepared for insurance purposes.

How do you report unvalued heritage assets in the financial statements?

You can report unvalued heritage assets in the financial statements by providing a good description of the heritage assets. You should take all reasonable steps to be transparent and accountable to readers of your financial statements about the heritage assets you hold.

A good description might include:

lists and descriptions of individual items or collections of heritage assets (for example, you could describe the nature, age and condition of heritage assets);

information about the number of each type of heritage asset;

information about the estimated annual cost of maintaining or preserving the heritage assets;

any valuation information (including a valuation for insurance purposes) you have about those heritage assets and a brief description about why that information is not reliable enough to include in the financial statements; or

any other information which would be helpful to readers of the financial statements to understand the characteristics and significance of the heritage assets.

Valuing heritage assets is a tricky proposition that requires weighing up a lot of information to make an informed decision. If you’re still unsure about how to go about it, we recommend that you speak to your auditor as part of the process.