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RECORDING DONATED PROPERTY

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Stephanie Flora Staff Accountant

Many times donors contribute land, buildings, stocks, or other property to non-profit organizations instead of making a monetary donation. Once it is determined that the non-profit organization is able and willing to receive this type of donation, they must figure out how to properly account for it.

Donations of property should be recorded at fair market value. ASC 820-10-35-9A defines fair value as "the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date." If the organization plans to sell the donated property within one year, it should be classified as a current asset. If the organization does not plan to sell the property within a year or plans to hold the property to sell at a later date, the donated property should be classified as a non-current asset.

According to ASC 820-10-05-1B, "fair value is a market-based measurement, not an entity-specific measurement." Fair value should be determined by using observable inputs unless unavailable. If observable inputs are not available, unobservable inputs may then be used to establish a value. Observable inputs use market data to develop fair value, such as using the New York Stock Exchange ending price of stocks to value donated stocks for a given day. For unobservable inputs, assumptions are developed based on the best information available in the circumstances. Property, such as land and buildings, is valued using unobservable inputs such as having an independent appraisal or comparing to other similar assets. For non-profit organizations that receive this type of property, having an independent appraisal done is the best option to develop an accurate value.

Donations, whether monetary or in the form of property, serve one purpose: to support the charitable organization. Charitable organizations may have a gift acceptance policy in place that helps identify the types of acceptable donations. Organizations are encouraged to accept only those donations that allow them to carry out their mission.

 

If you have any questions regarding the article above or any other issue affecting your not-for-profit organization please contact your Blue & Co. advisor or e-mail us at blue@blueandco.com or call us at 800-717-BLUE

 

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CIRCULAR 230 DISCLOSURE: To ensure compliance with recently-enacted U.S. Treasury Department Regulations, we are now required to advise you that, unless otherwise expressly indicated, any federal tax advice contained in this communication, including any attachments, is not intended or written by us to be used, and cannot be used, by anyone for the purpose of avoiding federal tax penalties that may be imposed by the federal government or for promoting, marketing or recommending to another party any tax-related matters addressed herein.


 

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