The Financial Accounting Standards Board (FASB) has released Accounting Standard Update (ASU) 2020-07, Not-for-Profit Reporting of Gifts-in-Kind. The purpose of the ASU is to improve GAAP reporting by increasing the transparency of the presentation and disclosure of contributed nonfinancial assets.
In addition to cash contributions, many not-for-profit organizations receive contributed nonfinancial assets, commonly known as gifts-in-kind. Both can help not-for-profits support their operations and achieve their mission. Typical gifts-in-kind may include:
Subtopic 958-605, Not-for-Profit Entities—Revenue Recognition includes specific requirements for the recognition and initial measurement of contributions and related disclosure requirements. However, it does not include guidance on specific presentation requirements or disclosure of gifts-in-kind beyond contributed services. ASU 2020-07 closes this gap and improves the transparency of gifts-in-kind for financial reporting and disclosures by not-for-profits.
The amended guidance requires not-for-profits to list contributed nonfinancial assets as a separate line item in the statement of activities, distinct from contributions of cash and other financial assets, and in footnotes to its financial statements.
The standard also requires expanded disclosures about the valuation of gifts-in-kind and how they are being used by the not-for-profit in its programs, fundraising, and other activities. For each type of gift-in-kind, these include:
The changes required by ASU 2020-07 are effective for annual periods beginning after June 15, 2021 and interim periods within annual reporting periods beginning after June 15, 2021. The amendments should be applied retrospectively. Early adoption of the revised standard is permitted.
Although the updated standard will require more work on the part of a not-for-profit, there are benefits. Donors will be able to review more detailed information on the not-for-profit’s financial statements about the organization’s gifts-in-kind and how they are used or monetized. The enhanced disclosures also can allay concerns about how an organization values the gifts-in-kind it receives.
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