Proposed Accounting Update for In-Kind Contributions

Many nonprofits receive donated goods and services (in-kind) from businesses and individuals to support the organization’s cause.  These include items such as inventory, property, equipment, supplies, food, and professional services.  In order to improve transparency of these gifts, the Financial Accounting Standards Board (FASB) has proposed an update to the accounting standards. 

The proposed update includes the following requirements related to in-kind contributions:

1. Present contributed nonfinancial assets as a separate line item in the statement of activities, apart from contributions of cash or other financial assets

2. Disclose:

a. Contributed nonfinancial assets received disaggregated by category that depicts the type of contributed nonfinancial assets

b. For each category of contributed nonfinancial assets received (as identified in (a)):

1. Qualitative information about whether the contributed nonfinancial assets were to or are intended to be either monetized or utilized during the reporting period and future periods.  If utilized, a nonprofit would disclose a description of the programs or other activities in which those assets were or are intended to be used.
2. A description of any donor restrictions associated with the contributed nonfinancial assets.
3. The valuation techniques and inputs used to arrive at a fair value measure, including the principal market (or most advantageous market) if significant, in accordance with the requirements in Topic 820, Fair Value Measurement.

Basically, more disclosures about in-kind contributions and whether the nonprofit has sold the donated goods or used it in programs or other operations.  This will allow the reader of the financial statement to clearly see the noncash contributions versus the cash contributions that a nonprofit receives and how they utilize these noncash gifts.

The update would be applied on a retrospective basis to the first set of financial statements following the effective date, which will be determined by the FASB.  The FASB was scheduled to receive feedback on the proposed update through April 2020, however; due to COVID-19, most of the FASB’s projects have been delayed. 

Posted by: Carrie Minnich, CPA