Exempted from depreciation recognition are works of art or historical treasures whose lives are long, if the asset is preservable and the owner has the capability of preserving the asset. The entities most affected by SFAS 93 are colleges, universities and religious organizations. There has been much controversy over SFAS 93. Depreciation is difficult to show in the financial statements, especially when fund accounting is employed. Even though major capital assets are funded through special drives, some capital assets are replaced by use of current funds.
Nonprofit entities sell products or services that are available from commercial enterprises.
This implies a matching of revenues and costs the same as commercial enterprises. Nonprofit entities are subject to federal income tax on unrelated business income. Depreciation should be recorded to reduce the tax liability. This meant that rather than just concentrating on reporting how funds were received and how funds were spent, the emphasis was now on how efficiently these resources were utilized. That is as true for assets acquired without cost as it is for assets acquired at a cost.