Presentation and Disclosures by Not-for-Profit Entities Receiving Contributed Nonfinancial Assets

On September 17, 2020, the Financial Accounting Standards Board (FASB) issued accounting standards Update 2020-07, Not-for-Profit Entities (Topic 958) – Presentation and Disclosures by Not-for-Profit Entities for Contributed Nonfinancial Assets.

This ASU was issued to address concerns about the lack of transparency in the financial statements regarding the amount of gifts-in-kind (GIK) received and used in an entity’s operation or monetized. This revised guidance does not change the accounting treatment or the valuation of the of a GIK. It requires more prominent presentation of contributed nonfinancial assets and enhance disclosures regarding valuation and use of the assets.

GIK’s arecontributed nonfinancial assetsdonations of goods or services that an organization would purchase in the normal course of operations. GIK’s of tangible property include items like operating facilities, including free or below market rent, utilities, office furniture, and supplies provided to an organization; items donated to an organization to be auctioned through your charitable events; and items used in program activities, such as pharmaceuticals, medical supplies, building supplies, appliances, and fixtures. Intangible gifts-in-kind include items like copyrights, patents, and royalties; specialized volunteer services (those that create or enhance nonfinancial assets or require specialized skills), such as those from doctors and nurses for medical organizations, project managers and builders for construction projects, and expertise, such as accounting and legal services.

The key provisions of the new standard are as follows:

  • Present contributed nonfinancial assets as a separate line item in the statement of activities.
  • Disclose disaggregation by category.
  • Disclose if monetized or utilized in activities in the reporting period, and if utilized, disclose the programs or other activities in which those assets were used.
  • Disclose any donor-imposed restrictions.
  • Provide a description of the valuation techniques and the inputs used to arrive at the fair value.
  • Disclose the principal market (or most advantageous market) used to arrive at fair value.
  • Disclose the entity’s policy, if any, about monetarizing rather than utilizing contributed nonfinancial assets.

The effective date this ASU is for years beginning after June 15, 2021, and interim periods within years beginning after June 15, 2022. This ASU is required to be applied on a retrospective basis. Early adoption is permitted.

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