A lot of not-for-profit organizations receive gifts-in-kind but there has not always been a lot of guidance on presenting gifts-in-kind in the financial statements and footnotes. Good news, the FASB has issued ASU 2020-07 – Not-for-Profit Entities (Topic 958) which addresses these issues.
This standard is meant to help increase the transparency of contributed nonfinancial assets, or gifts-in-kind as you may know it, for not-for-profit entities through enhancements to presentation in the financial statements and more detailed and descriptive footnote disclosures. Gifts-in-kind include, but are not limited to, fixed assets (such as land, buildings, and equipment), use of fixed assets or utilities, materials and supplies, intangible assets and donated services.
You may be wondering what changes you will see in your financial statements. Well, there are two main changes with the first change being that gifts-in-kind must be reported as a separate line item on the statement of activities. This means that the gifts-in-kind donations can no longer be grouped in with cash contributions. You could use various line descriptions for these contributed nonfinancial assets on the statement of activities such as gifts-in-kind, in-kind contributions, gifts, or donated services, just to list a few examples.
The second change will be within the footnote disclosures in the financial statements. You will be required to disaggregate the amount of gifts-in-kind that is reported on the statement of activities. What this means is that you will need to break out the gifts-in-kind by category in the footnotes such as supplies, donated professional services, food, and clothing, to just list a few examples. For each category of gifts-in-kind you will also need to provide the following information:
- A description of the programs or other activities in which those donated assets were used.
- A description of donor-imposed restrictions associated with the gifts-in-kind (if any).
- A description of the valuation techniques and inputs used to arrive at a fair value measurement.
These changes will be effective for annual periods beginning after June 15, 2021, which includes calendar year 2022 and fiscal year 2022. If you have any questions about the reporting changes related to gifts-in-kind please contact your Henry+Horne advisor.
Steven Taylor, CPA