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created a customary practice of recording animal and horticultural collections on their balance
sheet at the nominal amount of one dollar. These not-for-profits state that there is no objective
basis for establishing value of the collection, therefor they believe that these material assets need
not be reported on the balance sheet. The belief stems from the idea that these animal and
horticultural collections have numerous attributes, including species, age, sex, relationship, value
to other animals, endangered status and breeding potential that make it impractical to assign
value.
Auditors of these organizations include KPMG, PwC and Ernest & Young. These
auditors support the industry standard of leaving the value of the collections off the balance sheet
by giving an unmodified opinion. This means that the auditors believe the financial statements
have been prepared in accordance to Generally Accepted Accounting Principles. Cohn Reznick,
auditor of the San Diego Zoo, gave the following audit opinion “In our opinion, the combined
financial statements referred to above present fairly, in all material respects, the financial
position of SDZ Global as of December 29, 2013 and December 30, 2012, and the changes in its
net assets and its cash flows for the years then ended in accordance with accounting principles
We provide evidence supporting the premise that these animal and horticultural
collections are revenue producing assets and, in accordance with the standards set by the
Financial Accounting Standards Board, need to be recorded on the balance sheet. We do this by
investigating how publicly traded companies account for zoological collections, researching
rulings, standards and codifications on the topic as well as studying the relationship between the
size of the zoological collection and the revenue produced by the zoo. The findings of this study
will provide guidance in how these not-for-profit organizations should record their animal
collections.
Introduction
The Financial Accounting Standards Board (FASB) is the organization tasked to establish
standards of financial accounting that governs non-governmental entities. Both the American
Institute of Certified Public Accountants (AICPA) and the Securities and Exchange Commission
Accounting Concepts No. 6 defines elements of both business enterprises and not-for-profit
organizations. They define an asset as “probable future economic benefits obtained or controlled
conclusions in paragraph 2 of Concepts Statement 3 that assets and liabilities are common to all
organizations and can be defined the same for business and not-for-profit organizations.
And that
cannot long continue to achieve its operating objectives unless it can obtain at
The first is that the item “bodies a probable future benefit that involves a capacity, singly or in
combination with other assets, to contribute directly or indirectly to future net cash inflows.”
Zoological collections fit the criteria, as our research will show the size of a zoological
collection has a direct relationship with the admissions and membership revenue the zoological
organization is able to produce. Furthermore, these zoological organizations sell and buy
specimens from one another, creating a market and value for the transfer of the animals between
zoos.
Zoos are able to obtain the benefit of their collection by charging admissions for the
general public to view said collections. Furthermore, zoos are in full control of their collections,
as confirmed in the notes to the financial statement of the Atlanta Zoo which reads “Zoo Atlanta
has the right to acquire, borrow, sell, loan or otherwise transfer and convey animals as
considered reasonable and proper for the operation and maintenance of Zoo Atlanta.”
FASB’s third essential characteristic of an asset is “the transaction or other event giving
rise to the entity’s right to or control of the benefit has already occurred.”
Zoos purchase their animals and expense acquisition costs when incurred, as found in the
notes to the financial statement of the San Diego Zoo which reads “Expenditures related to
animal and horticultural acquisitions are expense in the period of acquisition.” This means that
there is a transaction that gives rise to the zoo’s right to control their own collection.
Furthermore, FASB goes on to address assets contributed without cost, in which they
state “Assets may be acquired without cost, they may be intangible, and although not
exchangeable they may be usable by the entity in producing or distributing other goods or
services.”
Based on this information provided, it can be concluded that zoological collections are, in
fact, assets held by zoos for revenue producing activity and need be reported on the balance
sheet.
statement reads:
“Collection items, although generally held for long periods of time and seldom
sold, are assets that continue to provide economic benefit or service potential
to beneficiaries. Those items also provide future cash flows from admissions,
rentals, and royalties, and often are the reason for contributions in support of
the entity's mission. The Board concluded that collection items have the
provide services or benefits to the entity that uses those items (Concepts
The statement expressly includes zoos, aquariums and nature centers as holders of
the above mentioned collections. The collections, even without intention to sell, provide future
economic benefit to the not-for-profits in the form of admissions and furthermore it would be
near impossible for such entities to create a market to sell bonds without holding the collections.
The San Diego Zoo, privately operated by the nonprofit Zoological Society of San Diego,
is the largest zoological membership association in the world. In the nonprofits 2012 audited
financial statement there lacks an asset classification for the collection. Instead the Zoological
Society of San Diego provides a note to the financial statement that reads
animal and horticulture collections are recorded at the nominal amount of one
species, age, sex, relationship and value to other animals, endangered status
This accounting treatment, practiced by the Zoological Society of San Diego and given an
unqualified audit opinion by Cohn Resnick goes against the guidelines set forth in FASB 116.
Further research finds that the ten largest zoos in the United States similarly report their
collections as an off-balance-sheet note to the financial statement rather than an asset on the
balance sheet. Some of these not-for-profits go as far as to provide their species and specimen
counts as well as acquisition and disposition costs off balance sheet while providing zero
Thorough investigation has found that there is currently no reasonable research in the
area of zoological collection accounting. FASB codification exists for treatment on collections,
including museums, galleries and zoo, however no direct requirements have been set forth and
no research has been conducted in this arena. We will research how for-profit firms account for
their animal collections and how tax auditor’s value animal collections to find insight in the
SeaWorld Entertainment, Inc is widely recognized as the leading marine-life theme park
brand in the world. As a publicly traded company, they are required to file a form 10-k annually
pursuant to section 13 / 15 of the securities exchange act of 1934. The company boasts 11
locations that are home to 86,000 marine and terrestrial animals and refers to itself as “one of
the world’s foremost zoological organizations and a global leader in animal welfare, training,
husbandry and veterinary care.” in 2013 SeaWorld Entertainment, Inc was host to 23.4 million
Unlike most zoological parks, which are not-for-profit, SeaWorld Entertainment Inc, as a
publicly traded company, must record its animal collections as an asset on its balance sheet.
Animals are recorded at cost and depreciated based the average life time of the animal, between
1 and 50 years. Material costs to purchase animals exhibited in the theme parks are capitalized
and amortized over their estimated lives (1-50 years). All costs to maintain animals and animal
collections are expensed as incurred, including in-house animal breeding costs, as they are
Equipment. In 2013 these animals were valued at $157,160,000 which is approximately 10% of
all PP&E.
one of the ten best aquariums in the United States. The aquarium is home to 20,000 animals
from over 660 species. According to the most recent annual report released by the New England
Aquarium attendance is approximately 1.4 million visitors accounting for $18 million in
revenues.
The difference in the two reports is how the for-profit SeaWorld Entertainment reports its
animal collection. The New England Aquarium records no useful life of its collection as well as
reports zero value associated with the collection on its balance sheet. In the disclosure notes we
find “Additions to the animal collections, which are purchased, are expensed when acquired.
Additions to these collections acquired other than by purchase are not assigned a value and are
companies that own animal collections including The Walt Disney Company, operator of Animal
Adventure. I also contacted several smaller privately held zoos. I received one response from
Nancy Krejsa, Senior Vice President of Investor Relations at Six Flags Entertainment Corp. She
informed me that “If we acquire them, they are recorded at acquisition cost. If they are born at
our facility, they have no value on our balance sheet.” This accounting is similar to SeaWorld,
as the animal collections are recorded at acquisition cost, however the zero value of birthed
accounting at the zoo. The article covers the San Diego Zoo’s tax bill handed out by the state of
California for $3.5 million in sales tax from the transfer of an estimated $19 million worth of
animal collections. The article reports that auditors for the state found zoo records listing trades
and assigning values for each animal including in the database each animals international species
number, scientific name and “per unit” price for all known zoo animals. In contrast, the Phoenix
Zoo reports in its notes to financial statement that “In accordance with industry practice, the
animal collection is not recorded, as there is no objective basis for establishing value.
Additionally, the animal collection has numerous attributes, including species, age, sex,
relationship and value to other animals, endangered status, and breeding potential, whereby it is
impossible to assign value. Acquisitions and sales of animals are recorded as operating expense
The financial statements of the Milwaukee Zoo adds to the question of a zoos ability to
establish value of their animal collection. The statement includes a note that reads “The ZIMS
information includes primary data such as common and taxonomic name, parents (whether at our
Zoo or at another facility), date and place of birth, gender and the circumstances of acquisition
such as birth, loan, purchase or donation. Similar facts are recorded when the animal leaves the
Zoo, such as the name of the recipient zoo, the date of transfer and terms of the contract or the
training, diet/feeding, development and medical notes and procedures all are data recorded in the
animal’s record. Animal medical information also is vital to the care of the animal collection.
The Medical Animal Records Keeping System, known as MedARKS, is used to create a detailed
medical record for each animal containing clinical notes, prescriptions, treatments,
The ZIMS database, also known as the Zoological Information Management System, is
capable of and used for tracking all attributes the zoo claims are including species, age, sex,
relationship and value to other animals, endangered status, and breeding potential which the zoo
states in its disclosure note that make assigning value impossible. ISIS, the not-for-profit
collaboration that created the ZIMS database system, lists all the zoos in the world that utilize
ZIMS. Of the 30 zoos we reviewed, 16 currently utilize the ZIMS database system and 2 are
pending deployment. This means that 60% of zoos researched have the ability to track attributes
of their animal collection which they deny the ability of having in the notes to their financial
relies on their ZIMS database to establish the value of their collection asset on their balance
sheet. Furthermore ZIMS users can search other databases for information about holdings at
titled “So just how will zoos fit a hippo on the balance sheet?” raises questions about how the
London Zoo will react to the Accounting Standards Board’s 2009 guidelines which required
museums and galleries to place value on precious artifacts and collections. While this is an
international case that does not reflect United States Generally Accepted Accounting Principles it
can be included in the discussion to see how the international community is handling collection
assets. The Accounting Standards Board’s statement reads “‘The disclosures should provide
readers with an understanding of the asset values being reported as well as the entity’s policies
for managing its total holding of assets.” Since 2009, the time the new standards were set and
the article written, the London Zoo has not heeded the requirements set forth by the Accounting
Standards Board. The zoo continues to report its zoological collection at no value.
FASB 116 states the following requirements for non-for profits. An entity that does not
recognize and capitalize its collections shall report the following on the face of its statement of
“An entity that does not recognize and capitalize its collections or that
their relative significance, and its accounting and stewardship policies for
period, it also shall (a) describe the items given away, damaged, destroyed,
lost, or otherwise deaccessed during the period or (b) disclose their fair value.
In addition, a line item shall be shown on the face of the statement of financial
position that refers to the disclosures required by this paragraph. That line
capitalized if they are added to collections that are held for public exhibition,
gain. Disclosures about collections that are not capitalized are required.”
However financial gain is being made from the zoological collections at these parks. The
Columbus Zoological Park Association had net expense for animal care, research and
conservation of $19.5mm while realizing net revenue from gate admissions and memberships of
$24.8mm, equaling net income from their zoological collection of $5.3mm. Because of the
financial gain the zoological park association can credit to its zoological collections, they should
FASB states that financial reports should provide all relevant and useful information on a
firm in the firm’s financial statement. FASB even goes as far to state that collections, including
zoological collections, need to be capitalized on the face of the balance sheet. For-Profit
companies currently follow this standard and are able to assign value to their animal collections.
Tax collectors have found a database held by the San Diego Zoo placing value on each animal in
its collection. Furthermore, with the advent of ZIMS, a database that tracks every characteristic
of each animal held in collection, the zoo is able to assign a relative value based on all
comprehensive characteristics.
We will run a multiple regression analysis on the amount of admissions revenue a not-
for-profit zoo earns using the independent variables of the amount of animals the zoo holds
(collection size), the amount of visitors the zoo receives annually, the size of the city the zoo
resides within and the amount of governmental contributions the zoo receives a year. We
hypothesize that this analysis will show a relationships between collection size and revenue,
proving that the animal collections are the main revenue producing asset of the organization.
Using this regression we will form an opinion about zoological societies long standing
customary practice to record their collections at the nominal amount of one dollar.
Methodology
According to the Association of Zoos & Aquariums there are 213 accredited zoos and
aquariums in the United States. Of these, 54% are non-profit organizations. Therefore there are
Of the 115 non-profit zoos and aquariums, we randomly select 30 (sample size 26% of
population) and research the correlation between admissions revenue and independent variables
of size of animal collections, city size, annual visitors and government contributions.
Model:
Variables:
C = Collection size, defined as number of animals that call the zoo home
P = Population of the city in which the zoo is located, based on the 2010 census data
This section analyzes the results of the test. The regression shows an R-Square of 0.8658
and an adjusted r-square of 0.8443. With these results of the model we can, with 84% certainty,
predict revenues of a zoo based on its collection size, contribution size, annual visitors and city
size.
All independent variables have low p-values, indicative of information that is important
in creative the model. The p-value of contributions, annual visitors and city size all are below
0.005 while the p-value of the collection size variable is 0.0166. These results are below the
significance level of 0.05 but above 0.01, therefor the results indicate that the observations are
highly unlikely under the null hypothesis. This means there is a strong presumption against the
Using the regression model we can create an equation that, with 84% certainty, can
predict a zoo’s annual revenue using the size of its animal collection, number of annual visitors,
amount of government grants and population size. The equation we return is revenue is equal to
In our scatter plot we see two major outliers. The first is a result from the New England
Aquarium. This creates an outlier as aquarial collections are typically much larger than
zoological collections (20,000 animals at the New England Aquarium versus an average of
approximately 2,600 animals at zoos). This is because many species of aquatic animals, such as
fish, are easier to keep, easier to reproduce and require smaller housing units. The second such
outlier is the Memphis Zoo, which does not participate in free zoo days like many other zoos on
the list. This results in zero visitors paying zero dollars, and skews their revenue per visitor
upwards.
Our regression returned an f-ratio of 40.3055 which is high, meaning there is a great
number of unexplained data results. Because this f-ratio is greater than 1.0, the linear fit gives a
very large f-ratio, indicating that it may not be a good fit to the data. We also have a standard
because larger cities have more leisure activities to offer, thus the zoos in larger cities may have
Our data covered thirty AZA accredited zoos in the United States, while there are four
hundred total zoos in the United States. Our sample size, about 7.5% of the total population of
United States zoos, may not be significant enough to uncover the actual relationship between a
The data we used in conducting our research may be inaccurate. Of the thirty zoological
independent auditor’s report. The remaining 17 reported their financials as unaudited figures in
their annual report. Furthermore collection size data was not audited in any report so we were
required to rely on information provided by the zoos which may not be an accurate reflection on
Very little research has been conducted in this obscure area of accounting, thus
there is not much literature to use in formulating results. This may result in less reliable results.
Recommendation
We believe we have been successful in proving that zoological and aquarial collections
are revenue generating assets in fact. Furthermore we have cited research from zoological
societies, tax law and the public sector which proves evidence that these collections are
measurable. Lastly, our model proves that the size of a zoos animal collection directly correlates
to its ability to generate revenue. We believe that a zoo without an animal collection would be
unable to generate admissions revenues in the millions of dollars as we have found in our
research.
Based on the above mentioned results, and in accordance to FASB 116, zoological and
aquarial not-for-profit organizations should report their animal and horticultural collections on
their balance sheet at acquisition cost. Any animals born on the property should be recorded at
the cost of raising the animal into adulthood. These organizations should depreciate these assets
Audit firms should not have given unmodified opinions on their audit reports of these
zoological organizations, as they do not comply with GAAP. As zoological societies deem it
appropriate in accordance with customary practice to record collections at the nominal amount of
one dollar, auditors should give a modified opinion with an additional paragraph highlighting the
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