ACCOUNTING FOR WORKS OF ART AND COLLECTIONS – TANGIBLE FIXED ASSETS – IN ACCORDANCE WITH THE CZECH LEGISLATION IN FORCE AND THE PROPOSAL OF NEW ACCOUNTING PROCEDURES

Abstract

The paper deals with the analysis of current Czech accounting procedures in the case of accounting for the works of art and collections, which are tangible fixed assets. The aim of paper is to assess the current accounting procedures of this issue and the proposal of new procedures. The method of process analysis examines the valid methodological procedures and characterizes their pros and cons. It has been found out that charging the works of art, which are tangible fixed assets, is in contradiction to the Accounting Act in accordance with the Czech legislation in force, as the result is not a faithful representation of the current value of entity’s assets. The works of art – tangible fixed assets, are represented in acquisition price in accounting. If the works of art are a part of structure, they are depreciated simultaneously with it. If they are represented independently, their value never changes in accounting in the course of time. Current accounting fails to reflect the increase of artwork value in the course of time. Therefore, it fails to provide a true image of entity’s assets and financial situation. The advantage of this way of charging is a fact that it is not demanding for an entity in terms finance and labor. New accounting procedures, which would enable the representation of the current artwork value, both its increase and its decrease, e.g. damage, are proposed in the paper. It would be possible to account for the increased market value on the basis of expert opinion in the given asset account in relation to the account in the group 58 in the 4th account class. It would be possible to account for the temporary decreased value with the help of adjustments, in the case of a permanent value decrease, in accordance with the expert opinion, the value of the given asset account would decrease in relation to the account in the group 54. The pros and cons of the proposed methodology are defined. The user would obtain current information about the value and structure of given entity’s assets. However, the adoption of the new methodology would be significantly demanding for an entity in terms finance and time.