The Financial Accounting Standards Board (FASB) issued an Accounting Standards Update (ASU) 2020-07 with the goal of increasing transparency about contributed nonfinancial assets for not-for-profit entities. Examples of nonfinancial assets covered under this ASU include:
• Donated legal and accounting services
• Donated medicine
• Donated rental space
• Donated travel
• Donated equipment
• Donated radio, TV and digital advertising
The ASU does not apply to contributed securities or other financial assets.
Under the new standard, material or significant contributions of nonfinancial assets will be more clearly presented on the face of the financial statements with a separate breakout. The terminology to be utilized can be at the discretion of the entity and may include “Contributed nonfinancial assets” or the historically utilized “Gifts-in-kind.” Additional disclosures will be required to further disaggregate such contributed nonfinancial assets by major type including amount of revenues recognized, utilization of programs/activities, donor restrictions and valuation techniques and inputs utilized.
This ASU is effective for annual periods beginning after June 15, 2021 and early adoption is permitted. Therefore, organizations with June 30 year-ends will be required to adopt and implement this standard for the year ending June 30, 2022.