Increased Transparency on Gifts-in-Kind

By Sibi B. Thomas  |  October 21, 2020

On September 17, 2020, the FASB issued Accounting Standards Update No. 2020-07 (“Update”) that increases transparency around contributed nonfinancial assets (also known as “gifts-in-kind”) received by not-for-profit (NFP) organizations—including transparency on how those assets are used and how they are valued.

The Update improves financial reporting by providing new presentation and disclosure requirements about contributed nonfinancial assets for NFPs. The proposed amendments do not change existing recognition and measurement requirements for those assets. The FASB decided not to change existing fair value measurement requirements in US GAAP.

The amendment applies to nonfinancial gifts-in-kind. nonfinancial assets include land, buildings, use of facilities or utilities, materials and supplies, intangible assets and services. Contributed securities and other financial assets are outside the scope of the Update.

The Update requires an NFP to present contributed nonfinancial assets as a separate line item in the statement of activities, apart from contributions of cash or other financial assets.

 The Update also requires an NFP to disclose:

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

2. For each category of contributed nonfinancial assets recognized and reported in the statement of activities:

• Qualitative information about whether the contributed nonfinancial assets were either monetized or utilized during the reporting period. If utilized, a description of the programs or other activities in which those assets were used.
• The NFP’s policy (if any) about monetizing rather than utilizing contributed nonfinancial assets.
• A description of any donor-imposed restrictions associated with the contributed nonfinancial assets.
• A description of the valuation techniques and inputs used to arrive at a fair value measure, in accordance with the requirements in Topic 820, Fair Value Measurement, 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 or using the contributed nonfinancial assets.

The amendments in this Update should be applied on a retrospective basis and are effective for annual periods beginning after June 15, 2021 and interim periods with annual periods beginning after June 15, 2022. Early adoption is permitted.

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About Sibi B. Thomas