A new Accounting Standards Update (ASU) aims to create greater transparency for how contributed nonfinancial assets are valued and used by requiring enhanced disclosures and separate presentation of contributed nonfinancial assets in the statement of activities.
The Financial Accounting Standards Board (FASB) issued ASU 2020-07, Presentation and Disclosures by Not-for-Profit Entities for Contributed Nonfinancial Assets, in September 2020. Prior to this update, many nonprofit financial statement users noted the diversity in nonprofit entities’ presentation and disclosure of contributed nonfinancial assets.
The new ASU applies to gifts-in-kind that are nonfinancial. Nonfinancial assets include land, buildings, use of facilities, materials and supplies, intangible assets, and services. Contributed securities and other financial assets are outside the scope of the ASU.
ASU 2020-07 requires a nonprofit organization to present contributed nonfinancial assets as a separate line item in the statement of activities. Additionally, the ASU requires enhanced disclosures around nonfinancial assets, including the following:
- Qualitative information about whether the contributed nonfinancial assets were monetized or utilized during the reporting period. If utilized, organizations will disclose a description of the programs or other activities in which those assets were used.
- The organization’s policy, if any, regarding monetizing rather than utilizing contributed nonfinancial assets.
- A description of any donor-imposed restrictions associated with the contributed nonfinancial assets.
- A description of the valuation techniques and inputs used to arrive at a fair value measurer, in accordance with the requirements in FASB ASC Topic 820, Fair Value Measurements.
- The principal market (or most advantageous market) used to arrive at a fair value measure if this is a market in which the recipient organization is prohibited by a donor-imposed restriction from selling or using the contributed nonfinancial assets.
Disclosures can be presented in a table, narrative, or combination. The following table illustrates sample disclosures.
| 20 x 2 | Usage in programs and activities |
Donor-imposed restrictions | Fair value techniques and inputs |
|
| Food | $36,610 | Mobile food pantry | $9,600 restricted for emergency hurricane response in the local community. The remainder was unrestricted. | Estimated average US wholesale price per pound for each food category as determined by America’s Food Production Valuation Survey. |
| Clothing
Supplies |
$14,560
$6,930 |
Adult and children’s program | Unrestricted | Estimated US wholesale prices of identical or similar products using pricing data under a “like-kind” methodology and utility for use at the time of the contribution. |
ASU 2020-07 is effective for annual periods beginning after June 15, 2021, and for interim periods within annual reporting periods beginning after June 15, 2022. The amendments in this ASU should be applied on a retrospective basis, and early adoption of this ASU is permitted.
If you have questions about how this new ASU could affect your nonprofit entity, reach out to an advisor at KraftCPAs.
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