In-Kind Donations Reporting and the New ASU

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, which was effective for periods beginning after June 15, 2021.  The ASU was issued to help improve transparency.

 

Under the new standard, not-for-profits are required to show contributed nonfinancial assets (in-kind donations) as a separate line item in the statement of activities. Previously nonprofits were allowed to record in-kind donations with cash contributions or other applicable financial revenue. The new standard does not change how an organization determines the value of the in-kind donation, but it requires the amount to be presented separately and it includes new related disclosures.

 

 

Examples of in-kind goods include donations of supplies, silent auction items, equipment, land, food, clothing, etc.

 

In-kind services are recorded as contributions at their estimated fair value only if the services create or enhance a nonfinancial asset or if the services require specialized skills, are provided by individuals possessing those skills, and would typically need to be purchased if not provided by contribution.  

 

Not-for-profits are required to disclose the in-kind donation separately  by category (either on the statement of activities or in a footnote) depicting the type of contributed nonfinancial asset, the descriptive details regarding whether the contributed nonfinancial assets were converted into monetary value or utilized during the reporting period, and any donor-imposed restrictions associated with the contributed assets. In addition, the valuation techniques and inputs used to arrive at a fair value measure must be disclosed.  

 

Do you need a CPA for nonprofit fund accounting? For additional information on this topic, please reach out to T.J. Sheldon, Associate Director of the Assurance Solutions Team at Mahoney.