Dear colleagues,
Thank you to the many who responded to my question regarding budgeting
for music purchases. Below is the compilation of responses, which are
pretty evenly divided between budgeting as a concert expense and
budgeting as a capital expense.

Sincerely,

we have gone round and round about this, but have consistently
decided to include it in operating expenses, because it is a concert
expense. We do maintain a library (capital), but it's still a
concert-related expense. --- It's both, really, but we track it as
primarily a concert expense. Be careful though...make sure you have a
line item for music for "other" purposes. There will be times that you
need to purchase music for non-series concerts, tours, private gigs,
etc. and you need to have money ready to purchase such music. Also, be
sure that, once you have it, you keep track of the value of it and
track it as an asset. Our librarian keeps columns of the purchase
price, publisher, and number of copies of each piece so we know what
our assets are (over 1,000 titles right now). It's good for budgeting,
and extremely important for insurance in case the music gets lost in a
fire or something.

FYI, music is a great way for people to donate to your organization.
You can get stickers made up cheaply that say, 'this piece given to
the __ chorus in memory of ___" They can take it as a tax write off
and you don't need to spend money on it. It's a pretty cheap donation
for them if they just do one or two pieces but it adds up for the
organization. We do it as concert expense, mainly because it is
helpful for the board to see the total costs to produce each concert. You might want to come up with a method of doing both:

1. You want to show the cost of the music (purchase, rental, copying,
etc.) as part of the cost of presenting the event, so you can have a
clear idea of how each event is doing financially.

2. The music that you purchase is presumably not going to be disposed
of, and might be used in later concerts, or rented, or sold at some
point. So it does become an asset, and can be depreciated.

So you are essentially treating the purchase of the asset (music) as
an expense related to the concert. -- Strictly personal opinion: If
the chorus buys the music and retains it for future use, it is indeed
a capital expense. Even though you bought it for a specific concert,
you have added to the chorus's inventory and worth. If it is rented
or borrowed and then returned after a concert, then the rental and
shipping are indeed concert expenses. If the chorus members buy and
keep their own copies, it is not a chorus expense because the chorus's
costs are reimbursed by the individual members, although any
unreimbursed expenses could be considered concert expenses. -- You've
bought the scores for the concert. Then will you keep them?
If they become part of the lasting property of the organization,
then they are not concert expense, but longer-term.
We were just discussing that issue with my board. Another way to state
this question is whether the music is an asset or not. We have a lot
of music on our books as an asset which is probably worthless in that
there are only a few copies of pieces that we'll probably not ever do
again. We're going to write them off. We also have scores and parts as
assets, and there's more justification for those as we might use them
again in the future. Nevertheless, since music expenditures vary with
the concert, and isn't like risers and shells which you'd use concert
after concert, I think they're expenses of the concert. I'd set up
the accounting system so that it's useful to you.On the other hand,
if you've got someone who wants to keep the books and all it costs you
is calling music a capital expense, why not? -- it only makes sense
to capitalize expenses that will be continuously involved in the
production of new revenue. If, like most community choirs, you sing
songs for one concert then put them in the library for 10 years and
get new titles for the next concert, then the sheet music should be
fully expensed. Risers, music folders, microphones and the conductor's
baton might be candidates for being capitalized but for most choruses
not sheet music. -- we classify music purchase as a concert expense --
For us, a concert expense is an outlay for an item or service that
will be used once related to a specific event: programs, tickets, a
technician, performance hall rent, etc. So unless you never plan to
re-use the music you perform in that concert, it's a capital
investment that you'll use again and, hopefully, again. That's an
incentive to make good choices in building your permanent library,
too, because every month another hundred wonderful pieces of music is
retired, permanently taken out of print by publishers (or their
accountants). So not only are you striving to make good programming
decisions each concert, but you're also preserving a piece of
repertoire that can and should serve you repeatedly in the future. --
In theory, once you purchase music, it is an asset with value that you
could obtain each time you perform a particular piece, rather than a
one-time expense.

However, most assets are depreciated or amortized (in the case of
intangible assets, such as music) over time, in accordance with
whatever their useful life is deemed to be. This is where I have a
question: on what basis do we properly amortize the asset?

I have taken this up with our treasurer, as our Purchased Music asset
has grown to a very large figure relative to other assets during the 7
years we've been in existence, and I'm afraid that we're overstating
our Balance Sheet. So any information that you glean from
knowledgeable Choralisters would be most helpful in my continued
discussion with the treasurer. -- I've been the executive director of
our community chorus for six years, and I also have a minor in
accounting. There are several criteria that I would apply to your
situation, but overall if you plan to keep the music in a library, use
it in the future, etc. you are right to consider it a capital expense.
If your music purchases are truly for one-time use (for a particular
concert or performance), then expensing it out would probably be best.
Since your group is likely not worried about profit-and-loss (it is a
non-profit organization, right?), either would be fine, but we do
consider our library a large asset to our organization. -- I am
finding (based on the size, currently 12) it is easier to budget music
based on per concert period and per person. We are a smallish but
growing organization and we perform primarily octavo settings at the
moment, with plans to expand. But, experience has taught me that when
budgeting for music, you never want to come up short on funds.
Ideally, you may want to consider both depending on the vision you
have for the group.

For me, I charge a general due of $60 for each concert period (3 in a
season equalling $180/season) and a $20 fee for music in each period
totaling $60 in music for the season. My singers know that they are
purchasing their music and they have the option of keeping or donating
it.
The group has no problem with this arrangement as they don't have to
pay
all at once. If I don't spend the per person amount, it goes into a
general "captial" fund and will be used for future music purchase.

This system for me has allowed me to find enough music for a concert
and it has so far covered my accompanist and my personal scores. As I
said, we are a small group with relatively little overhead. As we add
members this may change. Most groups I have experience with, do some
sort of budget like this. The pro is it's easy to manage. The con is
if you are planning to create a library of music it is up to the
singer to donate it back. I hope this helps. Also, I seriously
suggest joining Chorus America. Even though you're in Canada, the
organization is invaluable to the business side of Choral Management.

I would consider music purchases a capital expense, since you would
certainly use the music at more than one concert...It would not make
any sense to consider it an expense at one concert and not the next
time you use it...Concert expenses are what you would spend at EVERY
concert, such as advertising, travel, program printing, etc...then you
can deduct those from your ticket sales/donations to show a net
profit/gain depending on if you are a 501 (c)(3) organization or
not....music buying should be your greatest expense (unless you pay
your director and accompanist) and is just a by-product of your
organization. -- My own thoughts on that are along the lines of asking
whether it is a capital expense or not... namely, are you keeping the
music? Many community choruses around my area (New Hampshire) have
gone to the format of making the dues cover the music, and allowing
the membership to keep it. If you need to do a piece again, many will
still have it, and the chorale can purchase it for the newer members.
Mostly, this was to eliminate the need of maintaining a library. We
haven't found it to be an issue yet. They've done this for about 5
years or more. Anyway, if the music is kept in a library, I can see
the argument for calling it a "capital expenditure;" if the music is
"owned" by the membership, then it would be a concert expense, offset
by the dues. -- You should carry your music purchases as capital
expenditures and list them on your balance sheet.

Depreciation is a tricky question on music scores: I'm
of the opinion that scores don't depreciate but there
are accountants that will disagree with me. You
miught have your treasurer check with some colleges
and universities to see how they handle depreciation
on their books and other purchases.

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