The City of Allentown recently received a donation of two items: A letter written in 1820 valued at $24,000 from James Allen and 1920 painting of the town's city hall, painting by same artist sold recently for $4,000.How do I do a journal capitalizing collectibles only when required by GASB?
To journalize the donated items and capitalize collectibles only when required by the Governmental Accounting Standards Board (GASB), you need to follow these steps:
1. Determine if GASB requires the capitalization of collectibles: GASB provides guidelines for when to capitalize collectibles. Generally, collectibles should be capitalized if they have a significant value, verifiable market price, and meet certain criteria set by GASB.
2. Assess the collectible items: In this case, you have a letter written in 1820 valued at $24,000 and a painting of the city hall from 1920, with a recent sale price of $4,000. Determine if these items meet the criteria for capitalization as per GASB guidelines.
3. Consult GASB guidelines: Review the specific guidelines provided by GASB to ensure you understand the requirements for capitalization of collectibles. These guidelines can be found in GASB's Statement No. 34, "Basic Financial Statements—and Management's Discussion and Analysis—for State and Local Governments."
4. Determine if the items meet GASB's capitalization criteria: Based on the guidelines, assess whether the collectible items meet the criteria for capitalization. This includes considering the significance of the value, verifiable market price, and any other specific requirements outlined by GASB.
5. Create a journal entry: If the items meet the capitalization criteria, you can record them in the accounting system. The journal entry will involve debiting an appropriate asset account (e.g., Collectibles or Artwork) and crediting a revenue or donated asset account (e.g., Donation Revenue or Donated Assets). The specific accounts will depend on the organization's chart of accounts.
6. Follow proper disclosure requirements: Ensure that you comply with the disclosure requirements set by GASB for capitalizing collectibles. This may include providing detailed information in the financial statements or footnotes regarding the nature, value, and accounting treatment of the collectible items.
Note: It is essential to consult with a qualified accountant or financial professional to ensure compliance with the specific GASB requirements and any local accounting regulations that apply to your organization.