Governmental accounting for heritage assets: economic, social implications

Abstract

Neo‐classical economic theory provides the framework for general purpose financial reports prepared by Australian government departments and their agencies. These reports, which include a statement of financial position (financial worth) and an operating statement (an estimate of the return on the investment), have an economic rationale: the information is intended to guide the allocation of scarce government resources. All government assets, including those held for their cultural, historical or environmental values (heritage assets) are to be valued utilizing the neo‐classical theory of value. Argues that the accounting exercise is flawed. Measurement of value‐in‐use or value‐in‐exchange of heritage assets is inherently subjective, ignoring institutional conditions and non‐use values. The accounting approach fails to measure either the service value or economic benefits of governmental heritage assets. Consequently, the information generated is inconsistent with the economic rationale and the valuation process may prejudice any assessment of the performance of entities responsible for these assets. There is a strong case for either widening the concept of value to include non‐use values or abandoning the measurement of heritage assets.

Governmental Financial Reporting of Heritage Assets From a User Needs Perspective

“…Pallot () argues that heritage assets should be classified as ‘community assets’ because the owner of them has an imperfect ownership since he does not have other kinds of economic rights (usufruct, alienation, destruction). Pallot's concept is somewhat followed by other researchers (Stanton and Stanton, ; and Näsi et al., ), but for rather general reasons such as difficulties in the valuation of heritage assets and the prohibition or inability to sell heritage assets. Moreover, Carnegie and Wolnizer () argue that heritage assets cannot properly be described as financial assets and do not satisfy the criteria for recognition as an asset: heritage assets are not assets, either in conventional accounting terms or in commercial or commonsense terms.…”

“…More problematic is the fact that it is difficult to find an objective measurement for the entirety of heritage assets held by one entity. Accordingly, the accounting treatment of heritage assets is characterized by a partial inclusion and measurement (Stanton and Stanton, ), with traditional valuation methods seen as unsatisfactory at capturing the intrinsic value of heritage assets (Porter, ).…”

Debating the Impact of Accrual Accounting and Reporting in the Public Sector

“…Delving into the issue at successively deeper levels of intricacy, the main protagonists have continued, since the mid 1990s, to stand firm to their originally stated positions, hurling literary missiles, and missiles against one another's missiles (Carnegie and Wolnizer, 1996;Micallef and Peirson, 1997;andStanton, 1997 and, in a debate which does not appear to be any closer to a satisfactory resolution now than at the time it commenced.…”

Knowing “the price of everything and the value of nothing”: accounting for heritage assets

“…Thinking in terms of users and investors applies a theory of market-determined prices (based on consumers seeking to maximise their utility and producers seeking to maximise their profits) to the measurement and analysis of the financial performance of all government entities, regardless of whether they operate in non-market settings and have non-profit objectives (Stanton and Stanton, 1997). Both decision-making and accountability require information to assess the economy, efficiency and effectiveness of entity operations.…”