Nonprofit Update: New Accounting Standards for Gifts in Kind

Please note: This blog is current to the date of its publication, August 4, 2021. For more recent updates, contact SST’s experts

In-kind donations can provide significant benefits to nonprofit organizations (NPO). In-kind donations are non-cash gifts made by individuals, corporations, or businesses. Examples of in-kind donations are professional services including accounting, legal, medical, or consulting services, rent-free space, computer equipment, software, office supplies, office furniture, clothing, and food.

Under generally accepted principles (GAAP), nonprofit organizations have been required to value and record in-kind donations in their financial statements, however, there were no clear disclosure requirements for in-kind donations.

Recently, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update 2020-07 (ASU 2020-07) Not-for-Profit Entities (Topic 958): Presentation and Disclosures by Not-for-Profit Entities for Contributed Nonfinancial Assets, to increase transparency related to contributed nonfinancial assets (gifts in kind) through enhancements to presentation and disclosure.

ASU 2020-07 is effective for annual reporting periods beginning after June 15, 2021. Early adoption is permitted but must be applied retrospectively, meaning all years presented need to include the ASU 2020-07 presentation and disclosure requirements.

The new requirements under ASU 2020-07 include:

Presentation Requirement:

  • Separate line-item presentation of contributed nonfinancial assets in the statement of activities, apart from contributions of cash or other financial assets.

Disclosure Requirements:

  • Quantitative: Disaggregation of the amount of contributed nonfinancial assets received by category
  • Qualitative: For each category
    1. Information about whether the assets were monetized or utilized during the reporting period. If utilized, a description of the programs or other activities in which those assets were used.
    2. The NFP’s policy (if any) for monetizing rather than utilizing contributed nonfinancial assets.
    3. A description of any associated donor-imposed restrictions.
    4. A description of the valuation techniques and inputs used to arrive at a fair value measure, in accordance with requirements in Topic 820, Fair Value Measurement, at initial recognition.
    5. The principal market used to arrive at a fair value measurement if it is a market in which the recipient NFP is prohibited by donor restrictions from selling or using the contributed nonfinancial asset.

Once implemented, these presentation and disclosure requirements will provide more transparency and consistency in NPO financial reporting.

The experts at SST are equipped and available to guide your nonprofit through these updates. Contact us today to learn more