Presentation and Disclosure of Nonprofit Nonfinancial Gifts In-Kind

In September 2020, the FASB issued Accounting Standards Update 2020-07 (“Update”), Not-for-Profit (nonprofit) Entities (Topic 958) Presentation and Disclosures by Not-for-Profit Entities for Contributed Nonfinancial Assets, as the result of concerns regarding the lack of transparency around how a nonprofit’s gifts-in-kind are reported and used in the nonprofit’s programs and other activities.

Prior to this Update, contributions were disclosed using varying terms such as gifts, donations or gifts-in-kind. This Update clarifies the presentation and disclosure of these contributed nonfinancial assets; however, the recognition and measurement requirements for these nonfinancial assets remain unchanged in ASC 958-605. Nonfinancial assets include fixed assets (such as land, buildings and equipment), use of fixed assets or utilities, materials and supplies, intangible assets, services and unconditional promises of such assets.

All nonprofits that receive contributed nonfinancial assets will be affected by this Update. Below are the key provisions in this Update.

Presentation

Statement of Activities – contributed nonfinancial assets should be presented as a separate line item, separate from other contributions of cash and other financial assets.

Example:

Contributions – cash and other financial assets $ 900,000
Contributions – nonfinancial assets 690,000

Disclosure Requirements

A disaggregation of the amount of contributed nonfinancial assets recognized within the statement of activities by category that depicts the type of nonfinancial asset.

Example:

For the years ended December 31, 2022, contributed nonfinancial assets recognized within the statement of activities included:

Building $ 400,000
Vehicle 100,000
Food 55,000
Supplies 20,000
Clothing 40,000
Service 75,000
TOTAL $ 690,000

For each identified category of contributed nonfinancial assets (“CNA”), the following should be disclosed:

  • Qualitative information about whether the CNAs were monetized or utilized during the reporting period
    • If the CNAs were utilized, the disclosure should also include a description of the program or other activities in which the assets were used.
  • The nonprofit’s policy, if any, about monetizing rather than utilizing contributed nonfinancial assets
  • A description of any donor-imposed restrictions associated with the CNAs
  • The valuation techniques and inputs used to determine fair value measure at in initial recognition
  • The principal market used to determine fair value measure if it is a market in which the recipient nonprofit is prohibited by a donor-imposed restriction from selling or using the CNA.

Based on the number of categories of CNAs the nonprofit has, the above disclosures can be presented in a table or paragraph format. The Update provides disclosure examples for each format.

Effective Date

An amendment from the Update should be applied on a retrospective basis to all periods presented and are effective for annual periods beginning after June 15, 2021, and interim periods within annual periods beginning after June 15, 2022. Early adoption is permitted.

Although not effective until periods beginning after June 15, 2021, the Update must be applied retrospectively; therefore, nonprofits should ensure they are prepared with the information to provide the required disclosures for comparative statements.

BMF Advisors are here to help your nonprofit organization prepare for the implementation of this new ASU.

About the Authors

Katie A. Allender
Katie A. Allender
CPA
Manager, Assurance and Advisory

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