FASB updates nonprofit accounting standards for gifts in kind
The Financial Accounting Standards Board released an accounting standards update Thursday to enhance the transparency of how nonprofits report contributed nonfinancial assets, also known as "gifts in kind."
Gifts in kind can include fixed assets such as land, buildings and equipment, along with their use, in addition to utilities, materials, supplies of food, clothing or pharmaceuticals, as well as intangible assets and services.
“The ASU responds to feedback from not-for-profit stakeholders who identified gifts-in-kind as an area where the reporting could be improved,” said FASB member Susan Cosper in a statement Thursday. “It addresses their concerns by requiring more prominent presentation of contributed nonfinancial assets and enhanced disclosures about the valuation of those contributions and their use in programs and other activities, including any donor-imposed restrictions on such use.”
The update requires a nonprofit to show contributed nonfinancial assets as a separate line item in the statement of activities, apart from contributions of cash or other financial assets.
Nonprofits also will need to disclose contributed nonfinancial assets recognized within the statement of activities disaggregated by category that depicts the type of contributed nonfinancial assets.
For each category of the contributed nonfinancial assets recognized, nonprofits also need to disclose qualitative information about whether the contributed nonfinancial assets were either monetized or used during the reporting period. If it was used, they need to provide a description of the programs or other activities in which those assets were used. Nonprofits also need to provide their policy (if any) about monetizing as opposed to utilizing contributed nonfinancial assets. They also need to include a description of any donor-imposed restrictions associated with the contributed nonfinancial assets.
In addition, they must disclose the valuation techniques and inputs they used to arrive at a fair value measure, under the requirements in Topic 820, Fair Value Measurement, when they’re initially recognized. On top of that, they need to disclose the principal market (or most advantageous market) that was used to arrive at a fair value measure if it’s a market in which the recipient nonprofit is prohibited by a donor-imposed restriction from selling or using the contributed nonfinancial assets.
FASB said the amendments in the update should be applied on a retrospective basis and are effective for annual reporting periods starting after June 15, 2021, and interim periods with annual reporting periods starting after June 15, 2022, although early adoption is allowed.