In September 2020, the Financial Accounting Standards Board issued Accounting Standards Update (ASU) 2020-07 Presentation and Disclosures by Not-for-Profit Entities for Contributed Nonfinancial Assets. The ASU will enhance transparency surrounding the presentation and disclosure of contributed nonfinancial assets, often referred to as gifts in-kind, which can include contributions of land, buildings, use of facilities or utilities, materials and supplies, intangible assets, services, and unconditional promises of those assets.
While this new guidance does not impact the recognition and initial measurement of contributed nonfinancial assets, it will require that contributed nonfinancial assets be presented as a separate line item in the statement of activities, apart from contributions of cash and other financial assets. In addition, enhanced disclosures requirements are as follows:
- A disaggregation of the amount of contributed nonfinancial assets recognized within the statement of activities by category that depicts the type of contributed nonfinancial assets.
- For each category of contributed nonfinancial assets recognized:
- Qualitative information about whether the contributed nonfinancial assets were monetized or utilized during the reporting period and if utilized, a description of the programs or activities they were used for.
- The nonprofits policy, if applicable, about monetizing rather than using such assets.
- A description of any donor-imposed restrictions associated with the contributed nonfinancial assets.
- A description of the valuation techniques and inputs used to arrive at a fair value measurement at initial recognition.
- The principal market (or most advantageous market) used to arrive at a fair value measure if it is a market in which the recipient nonprofit is prohibited by a donor-imposed restriction from selling or using the contributed nonfinancial assets.
The changes noted in this update will be effective for annual periods beginning after June 15, 2021, with early adoption permitted.
Our nonprofit team can help your organization navigate the above changes and ensure compliance. Reach out to our team with any questions. Contact Us.