Filed under: Audit & Assurance, Not-for-Profits

On September 17, 2020, 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.

Contributed nonfinancial assets, also known as gifts-in-kind (GIK), can include fixed assets, such as land, buildings, and equipment; use of fixed assets or utilities; materials and supplies, such as food, clothing, and pharmaceuticals; and intangible assets and/or recognized contributed services.

The new ASU was issued to address concerns some stakeholders had about the lack of transparency in the financial statements regarding the amount of GIK received and used in an entity’s programs and other activities. The revised guidance does not change the accounting recognition or valuation of GIK, but it does require more prominent presentation of contributed nonfinancial assets and enhanced disclosures regarding valuation and use of the assets.

Key Provisions of ASU 2020-07

The key change under ASU 2020-07 is the requirement for entities to show GIK as a separate line item in the statement of activities, apart from contributions of cash or other financial assets.

In addition, entities will be required to disclose the following information:

  1. A disaggregation (breakout) of the nonfinancial GIK, by category, recognized on the statement of activities.
  2. For each category, qualitative information about whether the GIK was monetized or utilized during the reporting period. If utilized, a description of the programs or other activities in which the assets were used.
  3. The entity’s policy, if applicable, regarding monetizing, rather than utilizing, GIK.
  4. A description of any donor-imposed restrictions associated with GIK.
  5. A description of the valuation techniques and inputs used to arrive at the fair value measurement.
  6. The principal (or most advantageous) market used to arrive at a fair value measurement if it is a market in which the recipient entity is prohibited by a donor-imposed restriction from selling or the use of the contributed nonfinancial assets.

Effective Date

The amendments in this ASU are effective for annual reporting periods beginning after June 15, 2021 and interim periods within annual reporting periods beginning after June 15, 2022. They should be applied on a retrospective basis. Early adoption is permitted.

If you have questions regarding the new standard and implementation, please contact a Clark Nuber professional.

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