Accounting for Heritage, Cultural, and Community Assets: A Critique

This report provides a critical analysis of accounting for heritage, cultural, and community assets, focusing on how these unique assets are recorded and reported in financial statements. The study examines the challenges of applying standard accounting practices to assets that appreciate over time and offer primarily cultural and social benefits. The report explores the evolution of accounting standards, including IPSAS and IFRS, and the different approaches to valuing heritage assets, such as historical buildings, monuments, and artworks. It discusses the limitations of market-based valuations and the importance of considering non-financial metrics. The analysis includes a discussion of the principle of costing, matching principle, materiality, conservatism and monetary unit assumptions. The report also critiques the impact of neoliberal economic policies and the New Public Management (NPM) model on public sector accounting practices. The study also references the issues of disclosure and valuation of heritage assets in the balance sheet, and concludes with a discussion of how different accounting theories apply to heritage assets, emphasizing the need for appropriate accounting frameworks that reflect their unique characteristics and long-term significance, and recommends approaches to accounting for heritage assets to ensure accurate and transparent financial reporting.

ACCOUNTING FOR HERITAGE ASSET
INTRODUCTION
A critique study about the “Heritage and Cultural Assets” is done where the subject of
the analysis are the items which has a prime value considering its contribution to the
general knowledge, society, culture. The entire examination focuses on how these assets
are recorded in the books of accounts. The subject of the study are the physical assets but
at times also commonly referred to as intangible assets for accounting issues. These are
not reflected in the accounting records, which itself is a uniques feature which states that
the value of such assets might face an increase instead of depreciation, irrespective of its
physical condition. Heritage and Cultural assets generally sees its life in long term years
and tried to be preserved for decades in series. Value of the heritage assets fluctuates
continuously with time and possess strong support by contemporary factors like the usual
cultural trends of the society and the economic benefits. There is no standard accounting
strategy for the treatment of such assets in the accounting literature on the basis of
accrual accounting concepts, there is still witnessed efforts for such accounting. Different
accounting concepts can be used by the accountants for these assets to financially assess
and report for them. Barton (2005) believes that a more appropriate accounting
framework is required as they are not for economic purpose and no commercial market is
available for then.The creative New Zealand’s art development agency is held
responsible for delivering to the Government support for the arts. The country has
incorporated the accounting practices in the standard business style to all the government
activities all over around the world.
METHOD
Heritage Assets are usually the physical assets which qualifies to be like scientific,
artistic, technological, geophysical or environmental, which tend to maintain principally
for its contribution toward the culture and knowledge. The differences incorporated

around from the diversified basis of cash to the accrual based accounting system is to be
treated in the way of an initiative towards the improved Government financial reporting.
With these changes in the accounting standards, the stakeholders are destined with the
Government’s accounting obligations which has also been more severe and dedicated.
There has also been the emergence of the accounting style which includes the items of
the economic value that were initially held for the cultural properties. Simultaneously, the
economic value of such cultural properties is also likely to be affected by the broad
conception of its cultural value. Earlier, the heritage Assets are not generally kept in the
invisible mode in the financial statements. It is very late that these reforms have been
made in the accounting theories to also consider these cultural assets in the annual books
of finance. Value of heritage assets fluctuates continuously with time and possess strong
support by defined factors like the common cultural trends and the economic
opportunities. (Icaew.com, 2019) But, accounting policies takes into account only what is
visible and recognized in the accounting statements. These are the assets which has both
economic value and cultural value. Heritage assets are presently under control and for
future generations with the entire burden of protecting and preserving them. The public at
large, are the ones who enjoy the benefits of the cultural assets, therefore the entire
responsibility of its protection and the maintenance costs should be borne by them only,
as these are not disclosed in the Government’s personal assets and liabilities’ statement.
According to British definition trials, the ASB in its first issue of the Financial Reporting
Standard (FRS) 15, that is the Tangible Fixed Assets from the year 1999, doe not
properly define the heritage assets. The same has been critically analysed and defined by
the Accounting Standards 15 in the year 2009. Heritage assets when recognized must be
ideally illustrated in the financial statements according to the accounting standards as
covered for the other similar items such as property, plant, and equipment and therefore
should have the similar measurement and disclosure requisites. The accounting standard
FRS 30 lays down the mandatory disclosure requirements for the reporting of the
accounting assets, as issued by the Accounting Standards Board in June 2009.
(IFRScommunity.com, 2019)Though there is no standard accounting treatment for such
assets in the accounting concepts on the basis of accrual accounting concepts, there is still
witnessed efforts for such accounting. The common accounting approach towards the

inclusion of heritage assets is based on two ways, that is Assets Liabilities Matching
Approach, and
Non Assets-Liabilities Matching Approach
The characteristics of the said assets differ in properties and include the below:
● The legal or statutory obligations of the heritage assets may impose restrictions on the
ability to dispose of the assets
● These assets are very regularly irreplaceable and therefore there value might meet
increase with respect to time insite of their physical conditions depreciating or
deteriorating
● Normally, it is extremely cumbersome to evaluate their useful lives, which might in many
instances can be as large as 100 years also.(Publication, 2019)
The heritage assets are not normally used for their capability of generating the liquid cash.
These assets are detained for the reason these are the non-financial factors which are often
intangible. Heritage and cultural assets holds significance due to their age old benefits in
terms of the Accounting Standards and theories.
As stated above, the recording of these assets in the financial accounting records
according to the Accounting Theory 30, is essential because they form an integral part of
the organization’s control in terms of the assets. Such assets has inherent the future
economic benefits attached other than their heritage value. But still, there are also cases
when these are not successfully measured and hence not recorded in the balance sheet.
But this non-disclosure is should also be included in the accounting standard so as to
picturise the clear position of these assets. The recent insurance value of the asset should
be highlighted, significance and nature of the assets has to be disclosed, etc.
EVALUATION OF THE CRITIQUE
Since the heritage assets have high ethics and cultures attached to them, there lies an
important need of preserving the same in best of conditions for long term so as to

generate social benefits. The financial professionals businesses have the onus to state
perfect financial reporting of such assets due to these being public properties in which the
politicians are morefully interested. The assets are usually funded by taxation or private
donations so as to make it available to the public. The other properties that differentiate
them are generally immovable, cannot be sold,held for social purpose and owner’s ability
to dispose of them. Revenue is generated in this way for the benefit of the country, with
the increased cultural tourism.
Considering the accounting angle, heritage assets are characterized as below:-
● According to the market prices, the book value consideration seems to be very hard.
● There is a reasonable prohibition on the legal or statutory restrictions
● Depreciation is least important when considering the irreplaceability and price increasing
aspects.
● Difficulty in the identification of the useful life of the assets.
Varied accounting concepts can be hired by the accountants for these assets to finish off
with these financial and accounting reporting for them. Barton (2005) believes that a
more appropriate accounting framework is required as they are not for economic purpose
and no commercial market is available for then.(https://www.accaglobal.com, 2019) In
the section below, we shall look at how different theories are important for the use in the
context of these inalienable or restrictive covenant attached heritage assets:-
1. Principle of costing-This theory, primarily aims at recording the assets as soon as
they are acquired is applicable for such assets which government decided to undertake and
declare as heritage assets needs to be recorded at the same time. Though other assets value
decrease over time due to deprecation, in case of heritage assets it could be the other way round
that with time the value increases despite of depreciation. Another issue typical to such heritage
assets is evaluation of the costs or book value of theirs.
2. Matching Principle- Another theory of accounting that any transactions that fall into the
category of revenue/expenses should be united and reported. According to this principle,
expenses should be reported once incurred, such as a month, quarter or year, and the same. It’s

similar to the accrual method of accounting. For heritage assets, commonly known as public
assets under the management and control of the Government. Barton iterates that they are
externally used by the community and not treated as for the economic purpose with the standard
sale value. Therefore, the expenses and incomes of the heritage asset have to be recognized,
which is quite difficult, specifically for revenues which, as tourist attractions, is generally more
or less than one in a place for the same government.
3. Materiality-The theory of materiality lays down that any transaction as written in the books
of accounts, then it’s materiality needs to be rechecked if it has enough impact to be recorded.
Careful judgement has to be made while determination of the transaction’s materiality as no
particular outline has been drawn for determining the material impact. In the case of these assets,
the principle, as Outlined by Securities and Exchange commission, any particular transaction that
forms less than 5% of the total budget should be duly analysed.
4. Conservatism – In this case, all the liabilities already standing or potential liabilities must be
recorded as soon as it is figured out. This theory is mainly for liabilities, so that all the associated
expenses can be planned in advance. The same principle still holds true for heritage assets.
5. Monetary Unit Assumptions- This concept considers the dollar value and whether that it
will fluctuate over time. By such anticipation, the destined currency fluctuations, could be
beneficial to the government for these assets on the major restoration and expansion decisions.
The other biggest topic of debate in the context of heritage assets in accounting has been
how to view them on Balance Sheet. Different authors hold different views, while
Rowles et al. (1998) believes that they must be recordedin the balance sheet despite their
non disclosure with official definitions, Pallot (1990.1992) believes that they should be
reported as community assets in a separate category, Mautz (1998) agrees to report as
facilities in separate category. (Ncoa.gov.au, 2019)Thus, inclusion of heritage assets in
Balance sheet in any form has raised issues about their valuation.
Disclosure concept of accounting has a major role in the context of the heritage assets as
accurate and reliable valuation of these assets to decide on the value to be incorporated
on the balance sheet is extremely difficult. Half information, such as in cases of partial

capitalization, cannot be considered and also the role of non- monetary and qualitative
key performance measurements carries weight.. IPSAS 17 divides disclosure
requirements in the ways underlined below:-
● Public entities should provide existing information for each class of assets
● The existence of tangible fixed assets must be disclosed by the public entity
● Any additional information should be provided to ensure greater transparency and
comprehensiveness.
The creative New Zealand’s art development agency is held responsible for delivering to
the Government support for the arts. The country has incorporated in the government
activities, all the business style accounting practices. These accounting standards work
under the International Financial Reporting Standards or International Public Sector
Accounting Standards (IPSAS).
The heritage including the cultural assets in this zone consists of both important, both
physical and non-physical factors of the cultural, economic, social, and natural capital of
many public sector organizations. These heritage, cultural and community assets is not
distinctly recognised in the accounting standards. The heritage assets generally include
specimens, artefacts and from the public galleries, museums, libraries, colleges and other
institutions, gardens, buildings, parks, and many other tangible and intangible assets. This
section of the accounting for the said assets are covered under the regulation of
International Financial Reporting Standard (IFRS) 2. The community assets at large, are
the property elements, and the plant and equipment which are included in the public
benefit entities. These include the tangible assets like the parks, reserves, picnic or
camping areas, other public buildings and assets, railway systems, etc.(RSM New
Zealand, 2019)
CONCLUSION
The rise of the modern day culture, the heritage, cultural and community assets has
created a nuisance on the aspect of its financial reporting since, a lot of regulations are to

be followed for including in the report to the stakeholders for financial operations. This
leads to confusion in the accounting policies designed for such stated assets. In the years
1980s and 1990s, the Government of New Zealand has brought many changes, like the
legislative measures which regulates the fundamental changes on the areas of structure
and organizational objectives. There should be customisation to treat these assets in the
financial statements as these do not exhibit the cash component in any of its forms and
variant. The service capable assets are also included in these community assets and are
used to deliver the goods and services for the general and common good but ideally does
not include the cash flow transactions and hence it cannot be measured and reported in
the economic terms. The accounting standard IFRS 2 applies to all the biological assets
and non-financial instruments. (Taylor & Francis, 2019)Which are captured for sale in
the general course of business, when such production or sale procedure is followed.
APPENDIX SHOWING THE DETAILED COMPARATIVE STUDY OF THE
ARTICLES
Article 1 Article 2 Article 3
Author(s) Sheila Ellwood and
Margaret
Greenwood
Natalia Aversano
and Johan
Christiaens
Susan Wild
Year 2014 and 2015 2014 From 1980s

Title Critical
Perspectives on
Accounting
Government
Financial
Reporting of
Heritage Assets
from a User Needs
perspective
Accounting for Heritage,
Cultural and Community
Assets-Alternative Metrics
from a New Zealand Maori
Educational Institution
Full citation
Research problem What accounting
standards should be
applied towards the
Heritage and
Cultural Assets, its
accounting
measurement and
economic value.
To what extent
IPSAS 17 responds
to the needs of
users as regards
governmental
financial reporting
of heritage assets.
What can be the reporting
model for the recognition
and measurement of such
the heritage and cultural
assets according to the
NewZealand Maori
Educational Institution.
Research goal/aim Analysis of the
Accounting
Theories and
Standards
How effectively
heritage assets can
be reflected by
accountants and
practitioners in
accounts on behalf
of government?
To outline the principles of
the “wellbeing of the
communities” institution
based in New Zealand.

Specific research
question(s)
How to treat the
specificity of the
heritage assets in
the books of
accounts
To respond to the
information needs
of public, heritage
assets' financial
reporting has to be
accurate and in
alignment, so how
can this be
addressed by
accountants due to
difficulty in
analyzing the book
value of such assets.
Accountability and Public
Entity Benefits of the
accounting of such heritage
and cultural assets
Theories referred
to
IFRS 30 and AS 15 Disclosure
requirements,
Ideologies and Practices of
the NPM Model
Main theory relied
upon (literature
review, research
design)
IFRS 30 Research by
authors such as
Barton(2000),
Mautz(1988)
Pallot(1990),Carneg
ie and
Wolnizer(1995) and
Hooper et. Al(2005)
Wellbeing of Communities
Reporting Framework
from the year 2006.

Research Sample
(participants,
data…)
Experts at the
antique roadshow
Survey of mayors
and councillors in
the Italian
government
Public sector entities
including the NPF
Educational Institutions.
Research Tools
(instruments,
surveys, tests,
software…)
Local authority
AccountsAdvisory
committee.
To test the
hypothesis, a
survey of Italian
local government
with a population
above 30,000 was
conducted
The Public Finance Act
1989 and the GAAP
standards were the major
tools to carry out the
analysis.
Main results Heritage Assets are
a form of intangible
assets
Whether or not,
the users really
require information
about heritage
assets is a matter of
great conflict.
Wellbeing Communities
has broadly categorized to
apply toward the broad
concept of heritage and
cultural assets.
Link(s) to theory in
discussion of results https://www.icaew.c
om/library/subject-
gateways/accountin
g-standards/uk-frs/
frs-30
http://bibliotheque.
pssfp.net/livres/AC
COUNTING_FOR
_HERITAGE_ASS
ETS_UNDER_THE
_ACCRUAL_BASI
S_OF_ACCOUNTI
NG.pdf
https://www.rsm.global/ne
wzealand/news/accounting-
heritage-assets-why-and-
how

Conclusions or
recommendations
relating to
accounting practice
Heritage assets are
not dealt with in
cash and hence not
recorded in the
financial
statements.
For improved
record of heritage
assets, either their
value should be
assessed to record
them in balance
sheet or maybe
there is no value to
be assigned to such
assets for approval
in qualitative
manner.
That these assets are
consistent in the
information and are
essential for the consistency
and comparability in
reported fields wherein it
makes the user’s decisions
fruitful.

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