How the Accounting Standards Changes Presentation of In-kind Gifts
They are no longer able to be presented among cash contributions
It’s been almost two years now since the FASB issued Accounting Standards Update (ASU) 2020-07, Not-for-Profits Entities (Topic 958): Presentation and Disclosures by Not-for-Profit Entities for Contributed Nonfinancial Assets, also referred to regularly as in-kind gifts. This update does not change how organizations recognize contributed nonfinancial assets, but how they are presented. According to FASB Board Member, Sue Cosper, the ASU addresses concerns of nonprofit stakeholders “by requiring more prominent presentation of contributed nonfinancial assets and enhanced disclosures about the valuation of those contributions and their use in programs and other activities, including any donor-imposed restricted on such use.”
There were a few issues that arose in 2018 that moved this standard forward for FASB. The primary concern among officials specifically related to how donated pharmaceuticals, received as in-kind gifts, were being recognized based on wholesale market prices that potentially inflated the revenues and program expenses for some nonprofit organizations. The inflated revenue and expenses of these gifts would ultimately make those nonprofits appear larger than those with smaller resources and lower value in-kind gifts.
With the new ASU, in-kind gifts are no longer able to be presented among cash contributions or other financial assets on the statement of activities. The in-kind gifts are now required to be separated and presented independent of cash or financial asset contributions. The new standard also requires additional disclosures to the financial statements showing which programs or activities these in-kind gifts benefits or are used to further. In-kind gifts include fixed assets such as land, buildings, and equipment, supplies and materials which could include food, clothing, toiletries, printed materials or even contributed services.
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