A new accounting standard update (ASU) issued by the Financial Accounting Standards Board (FASB) provides direction on how nonprofits and charities can provide stakeholders with clearer information on gifts-in-kind (GIKs).
The new standard is designed to provide more transparency around these noncash contributions, which vary widely in type of goods, services and time. It does this by:
- Requiring more prominent presentation of contributed nonfinancial assets
- Requiring enhanced disclosures about the valuation of those contributions and their use in programs and other activities, including any donor-imposed restrictions
- Providing additional disclosure rules for recognized contributed services
ASU 2020-07, Not-for-Profit Entities (Topic 958): Presentation and Disclosures by Not-for-Profit Entities for Contributed Nonfinancial Assets, will take effect for annual periods beginning after June 15, 2021, and interim periods within fiscal years after June 15, 2022, but early adoption is allowed.
New Presentation and Disclosure Requirements
As scrutiny and litigation over the valuation of GIKs increase across the country, these new rules will help your nonprofit organization increase transparency and protect its reputation, without incurring any additional expense.
Under Topic 958, nonprofits and charities will need to separate donated nonfinancial assets from cash contributions and other financial assets in the statement of activities and categorize these assets in the footnotes to the financial statement.
For each category, the organization much disclose the following:
- Qualitative information about whether contributed nonfinancial assets were either monetized or used during the reporting period. If used, a description of the programs or other activities in which those assets were used;
- The nonprofit’s policy (if any) for monetizing rather than using contributed nonfinancial assets
- Description of any associated donor restrictions;
- Description of the valuation techniques and inputs used to arrive at a fair value measure, in accordance with Topic 820, Fair Value Measurement; and
- The principal (or most advantageous) market used to arrive at a fair value measurement if it is a market in which the recipient nonprofit is prohibited by donor restrictions from selling or using the contributed nonfinancial asset.
Grassi’s Not-for-Profit professionals are here to help you transition to these new disclosure requirements for gifts-in-kind, which include land, buildings and other fixed assets; food, clothing and pharmaceuticals; intangible assets; recognized contributed services; and other noncash donations. The new ASU will not affect the the recognition and measurement requirements for these assets.
For more information, please contact your Grassi advisor or David M. Rottkamp, Not-for-Profit Practice Leader.