As we continue through the first part of a new year, it is important to be reminded of a new Accounting Standards Update (ASU) that has been issued by the Financial Accounting Standards Board (FASB). In September 2020, FASB issued ASU 2020-07, Presentation and Disclosures by Not-for-Profit Entities for Contributed Nonfinancial Assets. This new standard applies to all not-for-profit entities that receive contributed nonfinancial assets.
The ASU was issued to address stakeholder concerns about lack of transparency related to how contributed nonfinancial assets are valued and used. The ASU addresses this concern by requiring more prominent presentation of contributed nonfinancial assets and enhanced disclosures about the valuation of those contributions and their use in programs and other activities, including any donor-imposed restrictions on such use.
Contributed nonfinancial assets—also known as gifts-in-kind or donated services—include fixed assets such as land, buildings, and equipment; use of fixed assets or utilities; materials and supplies; intangible assets; services; and unconditional promises of those assets.
Presentation Requirements in ASU 2020-07
Organizations are required to present contributed nonfinancial assets as a separate line item in the statement of activities, apart from contributions of cash and other financial assets.
Disclosure Requirements in ASU 2020-07
Organizations are required to disaggregate the contributed nonfinancial assets recognized within the statement of activities by category that depicts the type of contributed nonfinancial assets.
For each of the recognized categories of contributed nonfinancial assets, the following must be disclosed:
- Qualitative information about whether the contributed nonfinancial assets were either monetized or utilized during the reporting period. If utilized, organizations will disclose a description of the programs or other activities in which those assets were used.
- The organization’s policy, if any, about monetizing rather than utilizing contributed nonfinancial assets.
- A description of any donor-imposed restrictions associated with the contributed nonfinancial assets.
- A description of the valuation techniques and inputs used to arrive at a fair value measure, in accordance with the requirements in FASB ASC Topic 820, Fair Value Measurement, at initial recognition.
- The principal market, or most advantageous market, used to arrive at a fair value measure, if this is a market in which the recipient organization is prohibited by a donor-imposed restriction from selling or using the contributed nonfinancial assets.
Disclosure can be presented in either a table or narrative form. A full disclosure illustration is available in ASC 958-605-55-70V.
Transition to ASU 2020-07
This ASU will be effective for annual periods beginning after June 15, 2021, and for interim periods within annual reporting periods beginning after June 15, 2022. The amendments in this ASU should be applied on a retrospective basis, and early adoption of this ASU is permitted.
If you have questions, please contact your local Blue & Co. advisor.