WUCB103 - Accounting for Heritage Assets: Economic Value Essay

This essay explores the complexities of accounting for heritage assets, focusing on the challenges of measuring their economic value. It examines the characteristics of heritage assets, such as their long lives, uniqueness, and limited potential for generating cash inflow, and assesses whether they meet the standard definition of an asset according to accounting principles. The essay critiques commonly adopted valuation approaches like historical cost, replacement cost, fair value, and value in use, highlighting their limitations when applied to heritage assets. Using examples like the Great Barrier Reef, Sydney Opera House, and Sydney Harbour Bridge, the essay discusses how attempts to measure the economic value of these assets can affect perceptions of their heritage value. The essay concludes that while economic measurement may provide financial insights, it risks diminishing the cultural significance and public access to these invaluable assets. Desklib offers similar solved assignments and study tools for students.

Running head: ACCOUNTING FUNDAMENTALS IN SOCIETY
Accounting Fundamentals in Society
Name of the Student
Name of the University
Author’s Note

1ACCOUNTING FUNDAMENTALS IN SOCIETY
Introduction
In the recent years, the accounting processes for heritage assets have become a major
problematic area for the government of the countries as the nature as well as characteristics of
these assets make it difficult to do the valuation of these assets (Biondi and Lapsley 2014).
The aim of this essay is to discuss about different dimensions of the valuation of heritage
assets that include their characteristics, valuation processes, issues in valuation and others.
Discussion
Question 1
According to the Accounting Standard Board (ASB) of United Kingdom (UK),
Heritage Assets are considered as the specific intangible assets having the historical,
scientific, artistic, geographical, environmental or technological qualities; and these assets are
held as well as maintained principally as they contribute towards knowledge and culture
(Ellwood and Greenwood 2016).
It needs to be mentioned that the heritage assets have certain specific characteristics.
First, heritage assets have long lives. This long life can be considered as a time span of over
one millennia that is Stonehenge. The second characteristic is that heritage assets have certain
uniqueness and they are irreplaceable (Aversano and Christiaens 2014). The third
characteristic is that they are often donated; and sometimes, they are unchallengeable due to
the fact that cannot be sold in the presence of legal restriction. Lastly, the heritage assets have
more obligation of future cash outflow rather than future cash inflow; and for this reason,
they have more characteristics of liabilities than assets (Ellwood and Greenwood 2016).
According to the accounting standards, assets are considered as the future economic
benefits that the business entities control due to the result of past transactions or other past
events. However, there is difference between the definition of assets and heritage assets. In

2ACCOUNTING FUNDAMENTALS IN SOCIETY
case of heritage assets, the amount of cash outflow is more than the amount of cash inflow;
and this aspect makes the heritage assets more of liabilities than assets. In addition, the
absence of any past transaction as well as past event can be seen in case of heritage assets.
Most importantly, they cannot be sold that reduces the possibility of future cash inflow. It
implies that heritage assets do not meet the definition of asset as per accounting standards
(Ellwood and Greenwood 2016).
Question 2
The presence of certain approaches can be seen for the valuation of the assets in the
accounting processes. They are Historical Cost, Replacement Cost, Fair Value and Value in
Use. However, it needs to be mentioned that it is problematic to use these above-mentioned
methods for the valuation of the heritage assets; and there are some specific reasons for this
(Ellwood and Greenwood 2016).
Business organizations adopt the mechanism of historical cost on the acquisition of
assets. However, it can be seen in case of heritage assets that the heritage assets have not
been acquired or purchased in the recent years as they are donated or bestowed on frequent
basis. Thus, for these reasons, the method of historical cost is irrelevant for the valuation of
heritage assets. After that, the business organizations adopt the method of replacement cost
for the specialist assets (Wild 2013). However, certain characteristics of heritage assets like
uniqueness and largely irreplaceable makes it difficult for the respective authorities to adopt
replacement cost method for the valuation of heritage assets. Under the methods of fair value,
it is assumed that there is a presence of a market for the same asset or similar assets (Romão,
Paupério and Pereira 2016). However, in the absence of any market or the presence of price
volatility, it is not possible to adopt this method for the valuation of heritage assets. Lastly, it
is problematic to use the value-in-use method for the valuation of heritage assets as many of

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these assets are freely available or subscribed due to the presence of cultural, educational or
social benefits (Ellwood and Greenwood 2016).
Question 3
The above discussion indicates shows certain characteristics of heritage assets. In case
of Great Barrier Reef, Sydney Opera House and Sydney Harbour Bridge, they match the
characteristic of long lives as they have life of the span over millennia. After that, they have
their unique features and they cannot be replicable due to their nature. In the presence of
strict legal restrictions, they cannot be sold (Wild 2013). Hence, it can be said that these
assets fit the characteristics of heritage assets.
In case there is decision to measure the economic value of these heritage asset for
selling them, it does not mean that the perception will be affected. It depends on the fact that
how they have been held, maintained and made available. It also needs to be mentioned that
the attempt to economic measurement will result in the loss of cultural value of these heritage
assets along with the realization of financial value (Ellwood and Greenwood 2016). In this
manner, the perception about them can be affected. This aspect also depends on how the
authorities have divested these heritage assets along with the available safeguards for
ensuring the public access to the cultural knowledge about these assets (Ouda 2014).
Conclusion
The above discussion shows the major reasons that creates problem for the application
of commonly used method for the valuation of heritage assets. It can also be seen from the
above discussion that the presence of certain reasons affect the perception related to the
mentioned heritage assets.

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References
Aversano, N. and Christiaens, J., 2014. Governmental financial reporting of heritage assets
from a user needs perspective. Financial Accountability & Management, 30(2), pp.150-174.
Biondi, L. and Lapsley, I., 2014. Accounting, transparency and governance: the heritage
assets problem. Qualitative Research in Accounting & Management, 11(2), pp.146-164.
Ellwood, S. and Greenwood, M., 2016. Accounting for heritage assets: Does measuring
economic value ‘kill the cat’?. Critical Perspectives on Accounting, 38, pp.1-13.
Ouda, H., 2014. Towards a Practical Accounting Approach for Heritage Assets: An
Alternative Reporting Model for the NPM Practices. Journal of Finance and Accounting
Vol, 2, pp.19-33.
Romão, X., Paupério, E. and Pereira, N., 2016. A framework for the simplified risk analysis
of cultural heritage assets. Journal of Cultural Heritage, 20, pp.696-708.
Wild, S., 2013. Accounting for Heritage, Cultural and Community Assets–Alternative
Metrics from a New Zealand Māori Educational Institution. Australasian Accounting,
Business and Finance Journal, 7(1), pp.3-22.
Wild, S., 2013. Accounting for Heritage, Cultural and Community Assets-Alternative Metrics
from a New Zealand Maori Educational Institution. Australasian Accounting Business &
Finance Journal, 7(1), p.1.