Accounting Standard Update for Gifts in Kind
A recent accounting standard update (ASU) for nonprofits has been issued by the Financial Accounting Standards Board (FASB). ASU 2020-07 Presentation and Disclosures by Not-for-Profit Entities for Contributed Nonfinancial Assets will be effective for nonprofits with annual reporting periods beginning after June 15, 2021 and for interim periods within annual reporting periods beginning after June 15, 2022, and must be applied retrospectively.
Under this ASU, not-for-profit organizations are required to present contributed nonfinancial assets (most commonly referred to as “gifts-in-kind” or “in-kind contributions”) as a separate line item in the Organization’s statement of activities. In-kind contributions can no longer be combined on the same line item with contributions of cash and other financial assets. Furthermore, this ASU requires that in-kind contributions are also disaggregated based on the nature/type of contribution. This disaggregation may be done on the face of the statement of activities or in the notes to the financial statements. Finally, there are also several additional disclosures required for in-kind contributions under ASU 2020-07. The disclosures are required for each category of in-kind contributions and include the following:
- Qualitative information about whether in-kind contributions were monetized or utilized during the reporting periods
- Organization’s policy (if one exists) about monetizing rather than utilizing in-kind contributions
- A description of any donor-imposed restrictions
- A description of the valuation techniques and inputs used to arrive at a fair value measure
Some nonprofits have already been breaking out in-kind contributions as a separate line item on the statement of activities; so for these organizations, it will just be a matter of including some additional disclosures. For those organizations that have not been disaggregating in-kind contributions, it will be important to ensure that the organization’s books and records are set up to either separately track in-kind contributions or to easily find the information in order to facilitate efficient reporting of these contributions. It will also be important for organizations to understand the disclosure requirements and ensure that the relevant information is gathered and retained.
To read ASU 2020-07 in full, you can follow this link: FASB ASU 2020-07