Capitalising the Gallery’s Heritage Assets

Background and principles

Accounting Standard FRS 30 Heritage Assets provides the treatments under which heritage assets should be disclosed in the financial statements. It is a new standard and takes effect for accounting periods beginning on or after 1 April 2010. FRS 30 defines a heritage asset as “a tangible asset with historical, artistic, scientific, technological, geophysical or environmental qualities that is held and maintained principally for its contribution to knowledge and culture”.  The Gallery’s heritage assets consist of those assets held in its Primary, Photograph, and Reference Collection and the Heinz Archive and Library.  Before the publication of FRS 30, heritage assets acquired on and after 1 April 2001were required to be capitalised, and prior to this, the Charities SORP classified them as historic assets and they did not need to be capitalised. This has resulted in only part of the Gallery’s collections being capitalised. In the new accounting standard there is a presumption that all heritage assets should be capitalised, where information is available on cost or value, regardless of when they were acquired, and where heritage assets are not reported in the balance sheet, the reasons why should be explained. Furthermore, the notes to the financial statements should explain the significance and nature of those assets that are not reported in the balance sheet. As part of the requirement to explain the reasons for non disclosure, the NAO has asked that the Gallery should prepare a position paper explaining why it would continue not to capitalise those heritage assets acquired before 2001, if that is the course of action it decided to take in response to the new standard. 

Although there is a strong presumption to capitalise, FRS 30 does not require capitalisation in all circumstances and states: “Where this information (on cost or value) is not available, and cannot be obtained at a cost which is commensurate with the benefits to users of the financial statements, the assets will not be recognised in the balance sheet and the disclosures required by this standard should be made”. The Gallery undertook an investigation to assess the likely costs involved in capitalising all of its collections acquired before 2001, with a view to arriving at a decision about whether the estimated costs could be justified compared to the benefits which might be gained by users of the accounts.

The Gallery’s current position
The following table includes basic data about the Gallery’s collections. From the table it can be seen that very little of its collections have been capitalised to date.


Total items (from annual report and accounts)

Number capitalised

% capitalised

Assets to be capitalised

% on display






14% Painted or sculpted portraits

4% works on paper













Heinz Archive and Library (books, periodicals and manuscripts)






 In addition to this, only around half of the Reference Collection and the Heinz Archive and Library have been catalogued to date. Without full cataloguing it would be very difficult to undertake a comprehensive capitalisation of those collections, and in this case we would need fully to catalogue these collections first as part of the capitalisation exercise.

Calculating the cost of capitalisation

Appendix A discloses the estimated costs of capitalising the Gallery’s collections, and Appendix B outlines the staffing costs underlying the calculations and also the assumptions used in preparing them.   

The Gallery would undertake internal valuations of its collections, but would need to employ an Associate Curator specifically to carry out the task, with support from period Curators and the Chief Curator. All heritage assets to be capitalised would need to be inspected as part of the valuation process. It would be possible to review some of the collections on-line and make valuations based on the on-line images, which would speed up the process, however, we believed that this would not lead to an accurate, valid valuation as it would be important to assess the condition of the item and this could not be achieved effectively through an on-line review. A relatively small proportion of the collections are on display and particularly with the Primary Collection, where only 14% is on display, there would be additional art handling costs in locating, moving, unpacking and re-packing the portraits and sculptures in storage. Certain items of the collections are on loan and these would need to be viewed and valued, although we have not included the costs of valuing these items as they would not be significant. This overall approach is considered to be the minimum that would be required to arrive at a reasonable valuation.

As mentioned previously, some elements of the collections have yet to be catalogued completely. Cataloguing of these collections is part of an existing long term programme. This programme would need to be accelerated significantly if the Gallery was required to capitalise these collections, and the cost of doing so would need to be included as part of the exercise, otherwise the capitalisation project could take decades.


Relatively little of the Gallery’s collections have been capitalised to date. To undertake just the work to capitalise all items in the three collections with the staff available as tabled in Appendix B would take 27 ‘person years’ and cost £1.3 million. To ensure the exercise was relevant and useful to the user of the accounts, the capitalisation would need to be carried out over a relatively short period – certainly shorter than the 27 person years indicated above – which would account for a significant proportion of the Gallery’s current free reserves. In addition to this it should be noted that a substantial proportion of the Reference Collection and the Archive and Library collections have yet to be catalogued, this work would need to be carried out before capitalisation could be undertaken. Completing the cataloguing of these collections would add a further 16 person years to the work and cost an additional £500kFurthermore, because the valuations have been generated in-house, there is a high likelihood that some of them will not adequately reflect current market prices, because of the varied nature of some of the artefacts in the collections, the limitations in the knowledge of in-house staff concerning these artefacts, and the volatile nature of the art market. Thus, even though these valuations would be undertaken in accordance with the accounting standard, the usefulness of them to the reader is  questionable. To improve the accuracy of these valuations it would be necessary to employ the services of saleroom staff from one of the main auction houses to value specific, specialist items.  However, for the present we cannot assess the extent to which these additional consultations will be required and as a result we have not included the costs of employing them in this paper, although we would expect them to be significantly higher than the cost of employing in-house staff. The Gallery concluded that it could not justify this level of outlay in financial and staff resources, just for the purposes of capitalising its collections, which it considered was disproportionate to the benefit that users would obtain from the additional disclosure information, particularly in a period of austerity and with a very real prospect of such an exercise undermining its financial stability.     

The Gallery’s management were also concerned that should the collections be capitalised fully, it would introduce such a large value into the balance sheet that it could give the misleading impression that the Gallery was an asset rich institution, which might also prove a disincentive to potential donors. As a national collection, the Gallery is prohibited from trading in its collection assets, and therefore the value in the balance sheet does not represent a pool of financial resource which the Gallery could realise, as it would for a privately owned or non-national museum or gallery. Furthermore, the value could be so large as to obscure the readers’ understanding of the Gallery’s financial position at the year end and their assessment of the stewardship of the wider asset pool by management and Trustees during the accounting period.

Nick Hanks
Head of Finance and Planning
November 2010

Appendix A

 Cost of capitalisation


Items to capitalise

hours per item

Man days

Person years

Cost (£000)



Single items






Items in series






Art handling costs






Photographs and Engravings






Heinz (10% rare books)










Additional cataloguing costs


Reference Collection




Archive Collection




Library Collection





Grand Totals



Appendix B

Staff time and costs

Staff member

Annual  Cost (£000)

% or actual time allotted to valuation

Annual cost of staff time for valuation


Associate Curator




Period Curator




Chief Curator






Total Annual Cost


Art handling costs




3 Art Handlers


(7 weeks)


 Additional cataloguing costs

Archive and Library cataloguer




Head of Archive (Reference)





Archivist & Record Manager (Archive)




Librarian (Library)




Basic assumptions

  • Working (Man) day = 8hrs.
  • Person Year is 260 days (standard measure provided by Human Resources).
  • An Associate Curator would be employed for the specific purpose of valuing the Collections.
  • Valuation timings:
  • Primary Collection is made up of 50% single items and 50% items in a series. It takes 30 minutes to locate, inspect and value single items and 5 minutes to locate and value items in a series.
  • 10 minutes to locate and value Photographs and Engravings – on the assumption that we would need to inspect the items to assess for their condition rather than undertaking a review of those items via a desk exercise on-line.
  • 10 minutes to locate and value the rare books and manuscripts in the Heinz Archive, which account for about 10% of the items in this collection.
  • Not all of the collections have been fully catalogued, and this would need to be completed before an accurate valuation could be undertaken. Cataloguing of these collections is programmed and funded as part of the Gallery’s normal activities, however, if accounting guidance required this to be accelerated in order for all items in the Gallery’s collections to be capitalised, this would become an additional cost, over and above the normal programmed expense. The collections in question are as follows:
  • Reference Collection, where only 50% of the collection has been catalogued
  • Heinz Archive and Library, where only 50% of the Library books and manuscripts have been catalogued
  • The cost estimates for the Primary Collection include art handling costs of £13k for 3 art handlers at the store to unpack and re-pack portraits for inspection by the Associate Curator.

Comments on this policy are invited. Please e-mail your comments to [email protected]