QUESTION 2 ACCOUNTING FOR REVENUE RECOGNITION Read Georgina Safe's article ' Change of mind gives gallery a $1m surprise' and determine whether the...

QUESTION 2 ACCOUNTING FOR REVENUE RECOGNITION

Read Georgina Safe's article '

Change of mind gives gallery a $1m surprise' and determine whether the gallery should treat the donation as revenue. Further, if the donation is treated as revenue, how would that revenue be measured?

Change of Mind Gives Gallery a $1m Surprise Georgina Safe The Australian, 28 November 2000, p. 6 A million dollar painting, one of the most reproduced works in the country and due to be auctioned at Sotheby's tonight, has been withdrawn and donated to the National Gallery of Victoria.  The portrait Jeanne, by Australian artist Hugh Ramsay, was on show at Sotheby's Melbourne auction house yesterday morning before its scheduled sale for an estimated $1million. But by 3 pm the painting, one of Ramsay's best known works, had been delivered to the gallery's doorstep as a surprise gift from its owner, John Wicking. The 1901 painting of Jeanne Garreau, a six-year-old French girl, had previously been on show at the gallery for 40 years. It was lent to the gallery in 1947 by Ramsay's niece, the late Janet Wicking, but by the 1980's she had become unhappy that the work was hung in a gloomy corridor and she withdrew it. The painting was put up for sale, at a Sotheby's auction of Australian and International Painting, by John Wicking on behalf of his wife, who died last year. But Mr. Wicking had second thoughts after the catalogue was printed and resolved to donate the painting to the gallery, fearing that it might otherwise leave Australia.  'I am honoring my wife's ambition that the painting should go to a great public institution to ensure that this masterpiece....is enjoyed by the widest possible audience,' Mr. Wicking said in a statement. Gallery director Gerard Vaughan said yesterday his limited acquisitions budget meant the gallery would not have been able to afford the 'staggeringly generous' gift at auction. 'We have made it very clear to Mr. Wicking that Jeanne will take pride of place,' Dr. Vaughan said. 

The gallery's senior curator of Australian art, Terence Lane, said Jeanne was a masterwork that would complement the gallery's existing collection of 10 paintings by the artist, who died of tuberculosis in Melbourne in 1906, aged 28. Thirteen of Ramasay's paintings have been offered at auction over the past 10 years, with the highest price being $28750 for Portrait of a Young Girl, achieved in August 1994. The Australian's market analyst, Michael Reid, said Sotheby's had placed an ambitious value on the work and it may have been passed in at auction. 'The asking price of $1million to $1.2 million was exceptionally strong, given the track record of Ramsay over the past decade,' Mr. Reid said. Sotheby's managing director Paul Sumner said he was delighted the painting had gone to a public gallery where it could be seen by all Australians.