Many not-for-profit organizations rely on contributions of nonfinancial assets, commonly referred to as gifts-in-kind, to help achieve their missions. A new Accounting Standards Update issued by the Financial Accounting Standards Board (FASB) will require not-for-profit organizations to provide additional information about gifts-in-kind they receive.
Examples of gifts-in-kind include contributions of long-lived assets such as land, buildings, and equipment; the use of long-lived assets (for example, free use of office space); materials and supplies such as food, clothing, household goods, medical supplies, and pharmaceuticals; items such as tickets, gift certificates, and merchandise to be sold at fundraising events; intangible assets such as patents, copyrights, advertising space, and television or radio air time; and certain personal services such as services provided by accountants, architects, attorneys, carpenters, doctors, electricians, nurses, plumbers, teachers, and other professionals and craftsmen.
The Update does not change how not-for-profit organizations recognize and measure gifts-in-kind in their financial statements. The intent of the Update is to improve transparency in the reporting of gifts-in-kind, including transparency on how gifts-in-kind are used and how they are valued, by enhancing presentation and disclosure requirements.
The Update requires a not-for-profit organization to present gifts-in-kind as a separate line item in its statement of activities, apart from contributions of cash and other financial assets such as common and preferred stocks, bonds, and mutual fund shares.
In addition, the Update requires a not-for-profit organization to disclose a breakdown of the amount of gifts-in-kind recognized within the statement of activities by type. Then, for each type of gifts-in-kind recognized, the Update requires a not-for-profit organization to disclose:
- Information about whether the gifts-in-kind were either monetized or used during the reporting period and, if used, a description of the programs or other activities in which the gifts-in-kind were used.
- Its policy, if any, about monetizing rather than using gifts-in-kind.
- A description of any donor-imposed restrictions on the gifts-in-kind.
- How it valued the gifts-in-kind (in accordance with the requirements of other accounting standards).
The requirements in the Update should be applied on a retrospective basis and are effective for annual financial statements for fiscal years beginning after June 15, 2021, with early adoption permitted.
