Last September, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2020-07 regarding the disclosure and presentation of contributed nonfinancial assets. The purpose of the update was to increase transparency about how these types of assets are measured, as well as how many of them are used in the nonprofit organization’s programs and other activities.
Nonfinancial assets include gifts, donations, gifts-in-kind, and donated services. They also include fixed assets such as land, buildings, and equipment, or use of such fixed assets, materials and supplies, intangible assets, and services.
To increase reporting transparency, the ASU requires contributed nonfinancial assets to be presented as a separate line item apart from contributions of cash and other financial assets in the statement of financial position.
The amounts of these contributions must be further broken down and disaggregated by category. For each category, the organization must further disclose:
- Qualitative information about whether the contribution was monetized or utilized during the reporting period. If utilized, the ASU also requires a description of the programs that used the contribution.
- The organization’s policy (if you have one) about monetizing versus utilizing contributed nonfinancial assets.
- A description of any donor-imposed restrictions on the assets.
- A description of the valuation techniques and inputs used to arrive at a fair value measure at initial recognition.
- The principal or most advantageous market used in the valuation if it is a market in which there is a donor-imposed restriction on the sale or use of the contribution.
To comply with the ASU, your organization must have a tracking process in place to meet these new disclosure requirements. The new requirements apply retrospectively and take effect for annual reporting periods beginning after June 15, 2021 and for interim reporting periods beginning after June 15, 2022.
If you have questions about complying with the ASU, please contact our Nonprofit Group.