Current reporting under generally accepted accounting principles (GAAP) does not include specific presentation requirements for non-financial assets or disclosure requirements other than for contributed services. The new standard will require not-for-profit organizations to present in-kind donations as a separate revenue line item within the statement of activities.
Not-for-profit organizations no longer will be able to lump in-kind donations with other cash contributions. The standard will also require additional disclosures in the footnotes to the financial statements regarding the amounts of in-kind donations, broken out by category of assets received. For each category of donations received, disclosures are to be made regarding:
- Qualitative information on whether the not-for-profit organization used or sold in-kind donations during the reporting period, or if they intend to in future periods
- Any donor restrictions placed on the donation
- The valuation techniques used to measure the donation at fair value, including the principle market used to arrive at that fair value measurement
The Financial Accounting Standards Board's (FASB) new standard will improve financial reporting and aims to provide consistency in reporting among not-for-profit organizations, but it won’t impact revenue recognition and measurement requirements currently in place for in-kind donations. The standard will go into effect for annual reporting periods beginning after June 15, 2021, and should be applied retroactively. It is expected to be issued by FASB later in 2020.
If you have questions about the new standard, please contact your tax advisor.