FASB proposes new gift-in-kind disclosure requirements for not-for-profit entities
The Financial Accounting Standards Board (FASB) recently released a proposed Accounting Standards Update (ASU) aimed toward increasing transparency surrounding gifts-in-kind received by not-for-profit entities (NFP). The proposed amendments, published Feb. 10, 2020, would not create new recognition and measurement requirements, but rather would create new presentation and disclosure requirements.
Key provisions of the proposed ASU
According to the proposed ASU and an accompanying FASB release, these amendments would require an NFP to:
1. “Present contributed nonfinancial assets as a separate line item on the statement of activities, apart from contributions of cash or other financial assets.” The proposed ASU lists examples of nonfinancial assets as fixed assets, such as land, buildings, and equipment; the use of such fixed assets or utilities; materials and supplies; intangible assets; services; and “unconditional promises of those assets.”
a. Gifts-in-kind, listed in categories that reflect the type of contributed nonfinancial asset (e.g., building, food, clothing, pharmaceuticals, medical supplies).
b. For each category, disclose:
i. Whether the gifts-in-kind “were or are intended to be either monetized or utilized during the reporting period and future periods.” If utilized, the NFP would have to describe the programs or other activities in which the gifts were or would be used.
ii. Any donor restrictions on the contributed asset.
iii. “The valuation techniques and inputs used to arrive at a fair value measure, including the principal market (or most advantageous market), if significant,” in accordance with Topic 820, “Fair Value Measurement.”
The ASU would also require the following additional disclosures for contributed services:
a. A description of “the programs or activities for which those services were used, including the nature and extent” of those services and the amount recognized as revenue.
b. NFPs can describe the nature and extent of the services non-monetarily, such as in terms of donated hours or “service outputs” provided by volunteers, or monetarily, such as by giving the dollar amount raised by volunteers.
c. Contributed services must be disclosed regardless of whether they are recognized as revenue. For those that are not recognized as revenue, NFPs are encouraged to disclose their value, if it is practicable to do so.
Transition requirements and effective date
These amendments would be applied retrospectively to the first set of financial statements after the effective date, which has not yet been decided.
The FASB is requesting feedback on this proposed ASU. Specific questions listed in the ASU for feedback include, among others, whether the amendments appear operable, whether certain nonfinancial contributions should be excluded, whether retrospective application would be operable, how much time would be needed to adopt the amendments, and whether education or implementation guidance would be needed on valuation.
Comments can be submitted using the electronic form on the FASB website, via email, or by sending a letter (as listed on the FASB website). The comment period ends April 10, 2020.