This article, "The FASB Amends Presentation and Disclosure Requirements for Gifts-in-Kind," originally appeared on MossAdams.com.
The Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2020-07, Not-for-Profit Entities (Topic 958): Presentation and Disclosures by Not-for-Profit Entities for Contributed Nonfinancial Assets, on September 17, 2020.
The ASU is intended to increase transparency around the use and valuation of contributed nonfinancial assets, also known as gifts-in-kind, received by not-for-profit entities.
Key Provisions
Many not-for-profit entities rely on gifts-in-kind to conduct their programs and other mission-related activities.
Subtopic 958-605, Not-for-Profit Entities—Revenue Recognition, specifies requirements for the recognition and initial measurement of contributions. It doesn’t, however, include presentation or disclosure requirements for contributed nonfinancial assets other than contributed services.
In addition to contributed services, contributed nonfinancial assets may include:
- Fixed assets, such as land, buildings, and equipment
- Use of fixed assets or utilities
- Materials and supplies, such as food, clothing, and pharmaceuticals
- Intangible assets
The amendments require more prominent presentation of contributed nonfinancial assets and enhanced disclosures about the valuation of those contributions, while maintaining the existing recognition and measurement requirements for these assets.
Presentation
Under the updated guidance, contributed nonfinancial assets are required to be presented as a separate line item in the statement of activities, apart from contributions of cash or other financial assets.
Disclosures
Subtopic 958-605 currently requires not-for-profit entities to include disclosures for contributed services, including a description of the programs or activities for which those services were used, as well as the nature and extent of the contributed services received during the period and the amount recognized as revenue for the period.
While these disclosure requirements for contributed services aren’t eliminated, the amendments expand the required disclosures for recognized contributed services and provide disclosure requirements for other contributed nonfinancial assets in the scope of Subtopic 958-605.
The amendments require disclosure of all contributed nonfinancial assets received by a not-for-profit entity disaggregated by the category that depicts the type of contributed nonfinancial assets in the notes to the financial statements.
For each category of contributed nonfinancial assets received, the amendments require the following additional disclosures:
- Qualitative information denoting whether the contributed nonfinancial assets were monetized or utilized during the reporting period. If utilized, a description of the programs or other activities in which those assets were used must be included.
- The entity’s policy—if any—about monetizing rather than utilizing contributed nonfinancial assets.
- A description of any donor restrictions associated with the contributed nonfinancial assets.
- The valuation techniques and inputs used to arrive at a fair value measure in accordance with the requirements in Topic 820, Fair Value Measurement. The principal market or most advantageous market is also required to be disclosed if it’s a market in which the recipient not-for-profit entity is prohibited by a donor-imposed restriction from selling or using the contributed nonfinancial assets.
Effective Dates
The amendments should be applied retrospectively and are effective for annual reporting periods beginning after June 15, 2021, and interim periods within annual reporting periods beginning after June 15, 2022.
Early adoption is permitted.
We’re Here to Help
For more information on how the new presentation and disclosure requirements for contributed nonfinancial assets may affect your not-for-profit entity, contact your Moss Adams professional.