RECORDING DONATED PROPERTY

  Print Version

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.