The Financial Accounting Standards Board (FASB)’s Not-for-Profit Advisory Committee has made amendments to Accounting Standards Update (ASU) 2020-07 – Not-For-Profit Entities (Topic 958): Presentations and Disclosures by Not-For-Profit Entities for Contributed Nonfinancial Assets in an attempt to increase the transparency of contributed nonfinancial assets for financial statement readers.
The amendments to this update require nonprofits to present contributed nonfinancial assets as a separate line item on the statement of activities. Nonprofits will also need to provide a note disclosure that disaggregates the amount of contributed gifts-in-kind and other non-cash contributions by category.
Gifts-in-kind include fixed assets such as land, buildings and equipment, utilities, materials, and supplies such as food, clothing and pharmaceuticals, and intangible assets. As well as the use of fixed assets, contributed services and the unconditional promises of those assets.
The following information needs to be disclosed for each category of contributed gifts-in-kind and other non-cash contributions:
- Information about whether gifts-in-kind were monetized or used during the reporting period. If they were used, a description of how they were used is needed.
- The policy for monetizing rather than using the gifts-in-kind, if applicable.
- A description of any restrictions associated with the use of the gifts-in-kind.
- A description of the valuation technique that was used to arrive at the fair value of the gifts-in-kind.
The amendments are effective for annual periods beginning after June 15, 2021, and interim periods within annual periods beginning after June 15, 2022. Early adoption is permitted. The amendments for the ASU must be applied retrospectively.
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By Dylan Wright, CPA