Proposed international guidance on accounting for heritage asset to be issued by December 2020

Currently, IPSAS 17 on Property, Plant and Equipment allows entities an option to recognise heritage assets. If IPSAS 17 is applied to the recognition of heritage assets, entities are required to apply the disclosure requirements in IPSAS 17. The application of the measurement principles remains optional.

The International Public Sector Accounting Standards Board (IPSASB) intends to address the lack of guidance on accounting for heritage assets by issuing amendments to IPSAS 17 in December 2020. The final amendments to IPSAS 17 are scheduled to be issued in June 2022.

Control of heritage assets

Control of heritage assets is one of the areas that IPSAS 17 will clarify. This clarification will be included as Application and Implementation Guidance, and will address questions such as whether an entity:

• retains control of items in a heritage collection if they are held in storage instead of being displayed to the public;
• controls items in its heritage collection when it only has the right to hold the item for a short, defined period under an agreement with another entity that allows for the temporary use of the heritage item; and
• controls items in a heritage collection when it does not have legal ownership but has the right to hold the items for an indefinite period.

The guidance in the IPSASB’s Conceptual Framework for General Purpose Financial Reporting by Public Sector Entities (Conceptual Framework) will be used as the basis to address these questions. The Conceptual Framework clarifies that, in assessing whether an entity presently controls a resource, it needs to assess if the following indicators of control exist:

• legal ownership;
• access to the resource, or the ability to deny or restrict others to access the resource;
• the means to ensure that the resource is used to achieve its objectives; or
• the existence of an enforceable right to service potential or the ability to generate economic benefits arising from a resource.

While these indicators are not conclusive, an entity is more likely to demonstrate control of heritage assets if it satisfies most of these indicators. 

Depreciation of heritage assets

In 2017, the IPSASB issued a Consultation Paper on Financial Reporting for Heritage in the Public Sector. The purpose was to obtain initial views from stakeholders on the special characteristics of heritage items that could prevent entities from recognising them as assets. One of the areas where stakeholders had diverse views related to the depreciation of heritage assets. Some stakeholders supported the deprecation of heritage assets, while others indicated that heritage assets cannot be depreciated as they have indefinite useful lives.

The IPSASB also intends to address this controversial issue through amendments to IPSAS 17. The IPSASB’s preliminary view is that heritage assets should be depreciated, even though very long useful lives are a characteristic of heritage assets. Entities will need to assess if a heritage asset has an indefinite useful life. The IPSASB is considering amending the principles in IPSAS 17 to include a requirement that all non-land property, plant and equipment with an indefinite useful life should be reviewed annually for impairment. In addition, Implementation Guidance will be included in IPSAS 17 to enhance and clarify the principles to assess whether heritage assets have indefinite useful lives.

As part of the Accounting Standards Board’s ongoing commitment to influence the international standard setting process, the proposed guidance on heritage assets will be issued concurrently for discussion locally. If you are interested in these developments, subscribe to the ASB’s newsletter to receive further updates, or follow the IPSASB’s Heritage project by following this link.

The views expressed in this article are those of Secretariat and not the ASB Board.