It seems as though each year there is a new accounting standard that is going into effect, and in February 2020 the Financial Accounting Standards Board (FASB) issued a proposed Accounting Standards Update (ASU) to keep that trend going. The proposal relates to in-kind donations received by nonprofit organizations and came about because ASC 606 (Revenue Recognition) did not address specific presentation or disclosure requirements related to contributed nonfinancial assets (in-kind donations). Examples of in-kind donations would be fixed assets, materials, supplies, clothing and contributed services.
The purpose of the standard is to improve financial reporting by providing new presentation and disclosure requirements, including additional requirements for recognized contributed services. The goal of the standard is to increase transparency on how the assets are used and how they are valued. The proposed ASU would not change the recognition and measurement requirements for these type of assets.
The amendments in the proposed standard include the following:
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- Present in-kind donated assets as a separate line item in the statement of activities, apart from cash contributions.
- Disclose the following:
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- In-kind donated assets received during the year disaggregated by category.
- For each category of in-kind donated assets received, disclose the following:
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- Qualitative information about whether the donated in-kind assets were or are intended to be either sold or utilized during the reporting period and future periods. If utilized, an NFP would disclose a description of the programs or other activities in which those assets were or are intended to be used.
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- A description of any donor restrictions associated with the in-kind donated assets.
- The valuation techniques and inputs used to arrive at a fair value measure, including the principal market if significant, in accordance with the requirements in Topic 820, Fair Value Measurement.
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The amendments in the proposed standard would be applied on a retrospective basis. An effective date will be determined after the Board considers feedback on the proposed amendments. The proposed standard was in exposure draft, and FASB welcomed comments through April 10, 2020. The Board will hold a public roundtable and the staff will analyze the comments received before issuing any final standard.
If you have any questions in regard to how the proposed standard will impact your organization, please contact your Hawkins Ash CPAs representative.
