On September 17, 2020, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2020-07, Presentation and Disclosures by Not-for-Profit Entities for Contributed Nonfinancial Assets.
Nonprofits have been challenged to measure the value of the multitude of contributions they receive (which is not always easy) and are often scrutinized by watchdog agencies, donors, or other regulators.
The reason for this update is to improve transparency through enhancements to presentation and disclosure, it does not change the revenue recognition for Contributed Nonfinancial Assets, also often referred to as “Gifts In Kind” or “GIK.”
Nonfinancial assets include fixed assets (i.e.-land, buildings, equipment), use of fixed assets or utilities, materials and supplies, intangible assets, services, and unconditional promises of any of those assets. Contributions are also often called different names such as gifts, donations, grants, gifts-in-kind, donated services, etc.
Key highlights:
- Must be presented as a separate line item in the statement of activities, separate from cash contributions and other financial assets.
- Additional footnote disclosures:
- Disaggregation of the amount of contributed nonfinancial assets;
- Qualitative information about whether the contributed nonfinancial asset was monetized or utilized during the period (if utilized –disclose description of programs or activities where used);
- Organization’s policy (if any) about monetizing rather than utilizing these assets;
- Description of any donor-imposed restrictions;
- Description of the valuation techniques and inputs used to get to fair value at initial recognition (ASC 820 Fair Value Measurements); and
- Principal market used to arrive at fair value if the NFP is prohibited by a donor-imposed restriction from selling or using the asset.
Effective Date
This ASU should be applied on a retrospective basis and is effective for annual periods beginning after June 15, 2021. Early adoption is permitted.