Controversy gripped the nation on the afternoon of May 28, 2016. A three-year-old boy wandered away from his family while visiting the Cincinnati Zoo, climbing a three-foot-tall fence protecting the enclosure of Harambe, a 17-year-old western lowland gorilla. After ten minutes of suspense, zoo officials fired a single gunshot to euthanize Harambe, saving the child’s life.The aftermath of this incident caused many to speculate about the value of animal life and the ethics surrounding the zoo’s decision. But oddly enough, there are accounting standards specifically governing the valuation of zoo animal life. Most zoos, including the Cincinnati Zoo, are not-for-profit entities addressed by FASB ASC 958. Animals are considered to be collections in this context. Collections are generally works of art or similar assets that must meet all the following criteria:

1. They are held for public exhibition, education, or research in furtherance of public service rather than financial gain.
2. They are protected, kept unencumbered, cared for, and preserved.
3. They are subject to an organizational policy that requires the proceeds of items that are sold to be used to acquire other items for collections.

Once the zoo determines that the animals meet the above criteria – except, of course, the line stating that collections be kept “unencumbered” – the zoo may choose to capitalize the animals at fair value and depreciate them over their expected lifespan, or may choose not to record any value for the animals.

In practice, most not-for-profit entities choose to not capitalize any collection items. This is because the value of collection items is difficult to determine if the assets are to be held in perpetuity. For example, how could a CPA place a monetary value on the Temple of Dendur, an Egyptian temple built in 15 BC which is currently residing in the Metropolitan Museum of Art in New York City? This task would be easy if the temple was purchased on the open market by the museum, but it was donated as a gift by Egypt to the United States of America.

Sure enough, the financial statements for the Met note that the Temple and other priceless historical treasures are not capitalized. Nothing is presented on the Statement of Financial Position and any financial activity related to art acquisitions is reflected in Non-Operating section of the Statement of Activities:

Source: http://metmuseum.org/

One interesting wrinkle in ASC 958-360-25 is a line stating that “if an NFP does not recognize and capitalize its collections or capitalizes its collections prospectively, a line item shall be shown on the face of the statement of financial position that refers to the disclosures about collections required by paragraph 958-360-50-6.” One example of this can be seen on the Atlanta Zoo’s financial statements, where a nominal value of $1 is presented on the balance sheet for Animal Collections:

Source: http://www.zooatlanta.org/

There is some diversity in practice over the disclosure of collections at zero or nominal value on the statement of financial position, as some entities consider it unnecessary to present the line item on the financial statements. This does not appear to lead to a material misstatement in the disclosure, as long as the policy for recognizing collections is explained in the notes to the financial statements.

However, the intention of the standard appears to be in the right place, as the most significant assets at a zoo are the exotic animals that members of the public pay to watch and enjoy.

Despite the impracticality of assigning a monetary value to zoo animals and art collections, one can’t help but think that the value is greater than $1 as presented on the Atlanta Zoo’s financial statements. A poll released by Public Policy Polling in July included our departed friend Harambe alongside the candidates currently running in the Presidential election. Harambe was supported by 5% of the respondents, which was higher than the 2% level of support for Green Party candidate Jill Stein.

When advising clients about accounting and auditing issues at not-for-profit museums, zoos and other cultural centers, it is important to remain focused on the core activities of the entity. This allows us as CPAs to ensure that the public is appropriately informed about the organization’s activities and financial position as disclosed in the financial statements. As the outcry of support and grief over the tragic incident at the Cincinnati Zoo proved, issues of public trust and scrutiny can arise at any moment. We would be wise not to disturb that gorilla.

Brad Myers

KPMG LLP