Changes to Presentation and Disclosures for Contributed Nonfinancial Assets
Nonprofit organizations should prepare to provide additional information on the contributions of nonfinancial assets under ASU 2020-07, Presentation and Disclosures by Not-For-Profit Entities for Contributed Nonfinancial Assets. This accounting standard was issued by the FASB in September 2020 with the intent to increase transparency and reduce diversity in practice in the presentation and disclosures about types of nonfinancial assets received, how they are measured, and how they are used by the organization.
Also known as gifts-in-kind, contributed nonfinancial assets include property and equipment, materials and supplies, intangible assets, services, and unconditional promises to receive these assets. They do not include donations of cash or investments.
The change requires the presentation of contributed nonfinancial assets as a separate line item from contributed cash and other financial assets on the statement of activities. It also requires quantitative disclosure in a note to the financial statements of amounts of contributed nonfinancial assets by category based on type of gift, with a total that agrees to the amount presented on the statement of activities.
For each category of contributed nonfinancial assets recognized, the standard requires a nonprofit organization to disclose:
- Qualitative information about whether the assets were monetized (sold) or used during the reporting period, and in what programs and activities.
- The organization’s policy for monetizing or using these assets.
- Any donor-imposed restrictions on the assets.
- Valuation inputs and techniques used to recognize the assets’ initial fair values.
- The principal market (market with greatest level and volume of activity for the asset) or most advantageous market (market that maximizes the amount that would be received to sell the asset or minimizes the amount paid to transfer the liability) used in the fair value measurement of the assets in accordance with FASB ASC 820 if it is a market in which the recipient is prohibited by a donor-imposed restriction from selling or using the contributed nonfinancial asset.
The standard is effective for annual periods beginning after June 15, 2021, and for interim periods within annual periods beginning after June 15, 2022. It should be applied on a retrospective basis to all periods presented.
Nonprofits should ensure they have a process in place to navigate these changes and provide the appropriate information and disclosures under the new requirements.
Since 1974, our trusted advisors have partnered with nonprofit organizations to navigate every step of the financial journey. At Dugan & Lopatka, our CPAs and consultants are always on the cutting edge of changes in the nonprofit sector. We understand the challenges you face—the special accounting, auditing and reporting requirements of your organization—and we use our deep expertise to deliver exceptional service tailored to your needs.