FASB alters not-for-profit accounting rules for gifts-in-kind

By Ken Tysiac

Not-for-profits will be required to provide additional information on the contributions of nonfinancial assets they receive under a new accounting standard issued Thursday by FASB.

Also known as gifts-in-kind, contributed nonfinancial assets can include fixed assets such as land, buildings, and equipment; the use of fixed assets or utilities; materials and supplies, such as food, clothing, or pharmaceuticals; intangible assets; and recognized contributed services.

The new Accounting Standards Update (ASU) requires a not-for-profit to present contributed nonfinancial assets as a separate line item in the statement of activities, apart from contributions of cash or other financial assets. The standard also requires a not-for-profit to disclose contributed nonfinancial assets recognized within the statement of activities, disaggregated by category that depicts the type of nonfinancial assets.

For each category of contributed nonfinancial assets recognized, the standard requires a not-for-profit to disclose:

  • Qualitative information about whether the contributed nonfinancial assets were either monetized or utilized during the reporting period. If they were utilized, a description of the programs or other activities in which those assets were used is required.
  • The not-for-profit’s policy (if any) about monetizing rather than utilizing contributed nonfinancial assets.
  • A description of any donor-imposed restrictions associated with the contributed nonfinancial assets.
  • The valuation techniques and inputs used to arrive at a fair value measure, in accordance with the requirements in FASB ASC Topic 820, Fair Value Measurement, at initial recognition.
  • The principal market (or most advantageous market) used to arrive at a fair value measure if it is a market in which the recipient not-for-profit is prohibited by a donor-imposed restriction from selling or using the contributed nonfinancial assets.

FASB is requiring the standard to be applied retrospectively. The amendments take effect for annual reporting periods beginning after June 15, 2021, and interim periods within annual reporting periods beginning after June 15, 2022. Early adoption is permitted.

“The ASU responds to feedback from not-for-profit stakeholders who identified gifts-in-kind as an area where the reporting could be improved,” FASB member Sue Cosper said in a news release. “It addresses their concerns by requiring more prominent presentation of contributed nonfinancial assets and enhanced disclosures about the valuation of those contributions and their use in programs and other activities, including any donor-imposed restrictions on such use.”

Ken Tysiac (Kenneth.Tysiac@aicpa-cima.com) is the JofA’s editorial director.

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