If the proposals were implemented, enhanced disclosures would have to apply to all entities that hold heritage assets, regardless of whether they are or are not reported in the balance sheet. According to CaritasData, hardly any qualifying organisations do this.

Don Bawtree of BDO Stoy Hayward said FRED 42 is: ‘A great improvement on FRED 40 but it still leaves the balance sheet presentation unclear. It would be good if charities embraced the idea of additional disclosures to help make things as clear as possible.’

Andy Copestake, director of finance at the National Trust, told Caritas: ‘We do not consider heritage assets to be assets in the true sense – the liabilities associated with such properties normally far outweigh their value. The costs associated with the capitalisation of heritage assets should not be under-estimated, nor should the danger of this diverting scarce curatorial resources away from our core activities. The need to report useful information to our supporters concerning heritage asset acquisitions is something that the Trust has always considered important and while we will continue to exclude heritage assets from our balance sheet we are evaluating the proposals for enhanced disclosure of transactions contained in FRED 42.’

But Keith Hickey of CFDG was disappointed. ‘I feel it misses the opportunity to address an issue that has been troubling the sector for some time’ he said. ‘The original discussion paper, Heritage Assets, Can Accounting Do Better? issued in January 2006, was a genuine attempt to address this issue and was on the whole welcomed by the sector. However, FRED 42 merely leaves us as we are. The current position of part-capitalisation of heritage assets leaves charities with meaningless balance sheets that make it very difficult for the users of their accounts to interpret. The majority of charities strongly believe the capitalisation of heritage assets to be of no interest to the users of their accounts and consequently the costs of valuation to be far in access of any potential value to the users of the accounts. One charity with a significant portfolio of heritage assets has estimated that it would cost it £6m per annum to do so. However, throughout the discussion period since January 2006 a number of additional disclosures have been suggested which, apart from one disclosure requiring five years of historic information, have been welcomed by the sector.’

Comment on this article
Email this article to a friend