By Helena Bouron, CPA, Assurance & Advisory Director
In September 2020, the Financial Accounting Standards Board (FASB) issued accounting guidance focused on the presentation and disclosure requirements for contributed nonfinancial assets made to a nonprofit organization (NFP). This new guidance is effective for annual reporting periods beginning after June 15, 2021. This guidance does not change the accounting and recognition of nonfinancial assets, but rather enhances the presentation to increase transparency and comparability. Below, I have provided a summary of the new reporting and disclosure requirements your auditors will need for upcoming audits, and should help you understand the anticipated changes required in your financial statements.
Contributed nonfinancial assets are known as “gifts-in-kind”. The term “nonfinancial assets” includes fixed assets (land, building, and equipment), use of fixed assets, utilities, food, material and supplies, intangible assets, services, etc.
The key provisions of the guidance require nonprofit organizations to:
- Present contributed nonfinancial assets as a separate line item in the statement of activities, separate from contributions of cash and other financial assets.
- Include additional disclosures regarding:
- A breakout of the amount of contributed nonfinancial assets recognized within the statement of activities by category, which depicts the type of contributed nonfinancial assets.
- For each category of contributed nonfinancial assets recognized (as identified in (a.)):
- Qualitative information about whether the contributed nonfinancial assets were either monetized or utilized during the reporting period. If utilized, an NFP will disclose a description of the programs or other activities in which those assets were used.
- The nonprofit organization’s policy (if any) about monetizing, rather than utilizing, contributed nonfinancial assets.
- A description of any donor-imposed restrictions associated with the contributed nonfinancial asset(s).
- A description of the valuation techniques and inputs used to arrive at a fair value measure 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 NFP is prohibited by a donor-imposed restriction from selling the gifted asset, or the NFP has an imposed restriction by the donor concerning the designated use of the contributed nonfinancial asset.
The accounting guidance will be applied retrospectively to all periods presented in the financial statements.
If you have any questions about the financial reporting of gifts-in-kind, please call us at 408-377-8700, or contact our Nonprofit Group and we would be happy to help.