The Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2020-07, Presentation and Disclosures by Not-for-Profit (NFP) Entities for Contributed Nonfinancial Assets, in September 2020. This standard has been issued by to increase the transparency of financial reporting related to contributed nonfinancial assets, often referred to as “in-kind donations.” Nonfinancial assets are defined as fixed assets, use of fixed assets or utilities, materials and supplies, intangible assets, services, and unconditional promises of those assets.
Under the new ASU, nonfinancial assets are to be presented as a separate line item on the statement of activities and cannot be combined with cash contributions received. For each category of nonfinancial donations received, footnote disclosures are also required to be made regarding:
- Qualitative information on whether the NFP used (including which program/activity, if applicable) or sold the nonfinancial assets during the reporting period, or if they intend to in future periods
- Any donor restrictions placed on the contributed nonfinancial asset
- The valuation techniques used to measure the nonfinancial asset at fair value, including the principle market used to arrive at that fair value measurement
FASB’s new standard will improve financial reporting and aims to provide consistency in reporting among NFPs, but it won’t impact the revenue recognition and measurement requirements currently in place. This standard will apply to any NFPs that receive contributed nonfinancial assets on a retrospective basis and is effective for annual periods beginning after June 15, 2021, and interim periods within annual periods beginning after June 15, 2020. NFPs can adopt this standard early if they prefer.
If you have questions about the new standard, please contact us or reach out to your CSH advisor.