In 2004, the Accounting Standards Board kicked off an ambitious project to find a way to account for heritage assets.
It published a discussion paper in 2006 with an impressive image of the Rosetta Stone on its front cover. The stone, with its priestly decrees from the time of Ptolemy V, was seen as epitomising the difficulty of valuation. How do you value a unique asset that provided the key to the understanding of Egyptian hieroglyphs, acquired as a spoil of the Napoleonic Wars?
Five years' thought from the best accounting brains in the country produced no convincing answer. The new accounting standard on heritage assets, FRS 30, which applies to financial years starting on 1 April 2010 and onwards, takes the same line as the Statement of Recommended Practice. Both say that if you know the cost of a heritage asset or can value it, do so. If you can't, provide further explanation in the accounts so people at least understand the nature of the asset.
However, the new standard requires some sensible extra information. Most interestingly, details are now required on the extent of access permitted to heritage assets. This is relevant to questions of public benefit and might also help to prevent a 'private collection' mentality from developing among curators and trustees.
But there are other areas of accounting where valuation is tricky, such as volunteers. The Sorp asks for valuation when the donated service is provided by an individual as part of their trade or profession. Again, when valuation is impractical or simply produces the wrong answer, the solution is to explain the contribution of volunteers. Its approach is simple and avoids difficult questions such as, for example, whether someone laying the flowers at a church altar is a volunteer or a worshipper.
Because convergence with new International Financial Reporting Standards is in the pipeline, the debate on valuation is sure to resurface. The IFRS uses a principle of 'fair value'. Most would agree that an asset such as freehold property donated to a charity should be valued in its accounts.
The Sorp talks of including the value to the charity of the gift. In my view, where the property is saleable, logic dictates including the gift at its market value. Some argue that if a charity was gifted a mansion in Mayfair but only needed a basement in Brixton, then the accounts should include the value of the latter. This seems wrong to me, because it does not capture 'fair value'.
So if you get something that you really cannot value, like the Rosetta Stone, make sure you describe it well and if you can value a gift, then please do it fairly.