The Financial Accounting Standards Board (FASB) issued Accounting Standard Update (ASU) No. 2020-07, Not-for-Profit Entities (Topic 958): Presentation and Disclosures by Not-for-Profit Entities for Contributed Nonfinancial Assets in 2020. It requires new disclosures and presentation for what is commonly known as gifts-in-kind. The change applies to any nonprofit that receives contributed nonfinancial assets such as food, clothing, services, materials, supplies, intangible assets, use of facilities and fixed assets such as land, buildings and equipment.
The FASB issued ASU 2020-07 to address concerns related to transparency around such gifts, including how they are used and valued. The update does not change the way contributed financial assets are recognized, measured or presented.
Under the new standard, a nonprofit is required to present contributed nonfinancial assets as a separate line item in the Statement of Activities, apart from contributions of cash and other financial assets.
It also requires the nonprofit disclose the amount of contributed nonfinancial assets received, disaggregated by category, that depicts the type of contributed nonfinancial assets, as well as additional information for each category of contributed nonfinancial assets received:
- Qualitative information about whether the contributed nonfinancial assets were monetized (for example, by selling them) or utilized in operations during the reporting period. If utilized, the nonprofit must provide a description of the programs or other activities in which those assets were used
- The organization’s policy (if any) about monetizing rather than utilizing gifts-in-kind
- A description of any associated donor-imposed restrictions
- A description of the valuation techniques and inputs used to arrive at the gift-in-kind donation value in accordance with Topic 820, Fair Value Measurement, at initial recognition
- The principal or most advantageous market used to calculate this value if it is a market in which the recipient nonprofit is prohibited by a donor-imposed restriction from selling or using the contributed nonfinancial asset
The new reporting standard should be applied on a retrospective basis and is effective for annual periods beginning after June 15, 2021, and interim periods within annual periods beginning after June 15, 2022. Early adoption is permitted. If you are presenting comparative financial statements, you will need to disclose this information for the prior comparative year as well.
Some nonprofits may require additional review of processes and controls related to gifts-in-kind, and policies may need to be developed as well as tracking systems updated to accurately reflect this activity.
The increased transparency can help leaders charged with management and governance better prioritize and maximize opportunities related to gifts-in-kind and foster more awareness and passion around these types of non-monetary support.