By Jayme F. Moore, CPA
Accounting & Auditing Director

If your nonprofit organization accepts contributions of nonfinancial assets, you should know about Financial Accounting Standards Board (FASB) rules approved last year. Accounting Standards Update (ASU), Not-for-Profit Entities (Topic 958): Presentation and Disclosures by Not-for-Profit Entities for Contributed Nonfinancial Assets is intended to increase transparency around gifts in kind.

What are gifts in kind?

Gifts in kind are donations of goods, services or time instead of cash. Gifts in kind of tangible property include items like operating facilities, utilities, office furniture and supplies provided to your organization; items donated to your organization to be auctioned through your charitable events; and items used in program activities, such as medical supplies, building supplies, appliances and fixtures. Intangible gifts in kind include items like copyrights, patents and royalties; specialized volunteer services, such as those from nurses for medical organizations or project managers and builders for construction projects; and expertise, such as accounting, legal and consulting services.

New procedures and disclosures

The most dramatic change from previous gifts in kind rules is that donations should be reported by type of asset (for example, building, food or pharmaceuticals), rather than reported in aggregate. The rules also require you to report gifts in kind donations as a separate line item in the statement of activities.

Further, you must disclose:

• Your organization’s policies for monetizing in-kind donations (such as by selling them), rather than actually using the donations in your operations,
•  Any donor restrictions,
• The valuation techniques and data used to calculate a gift’s value, and
• The principal market or most advantageous market used to calculate the gift’s value.

This last disclosure is necessary if donor restrictions prohibit your nonprofit from selling or using the donation in the principal or most advantageous market. The principal market has the highest volume of activity for the donated asset. The most advantageous market generally maximizes the amount that would be received if the donation were sold.

Compliance required soon

If you aren’t already following the rules, prepare to comply with them. They take effect for annual reporting periods starting after June 15, 2021, and interim periods within fiscal years starting after June 15, 2022. Contact us if you have questions or need help.