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Organizations that elect to capitalize all collection items must follow a consistent accounting policy for these items. Collection items that are acquired in exchange transactions should be recognized as assets in the period acquired and should be measured at cost. This treatment is consistent with any other type of capital asset purchase. (NFP Audit Guide)

Donated collection items should be recognized at their fair value in the period received. These items should be recorded as assets and as contribution revenue. Fair value, in concept, is generally based on quoted market prices. However, many collection items are unique and are unlikely to have quoted market prices. This uniqueness is what makes them collection items in the first place. If market prices are not available, fair value may be based on quoted market prices of similar items, appraisals, or other valuation techniques. For collections, appraisals are a likely source of information. Remember, the donor is also likely to be interested in determining fair value for tax considerations.

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