Changes for Nonprofits When Reporting Gifts in Kind

Morgan Blogs Part 2

Gifts in kind (GIKs) or nonfinancial assets are wonderful for not-for-profits (NFPs). Donated land, services, food and buildings often help to further a nonprofit’s mission and its business goals.

But, determining the financial value of these donated assets and services are difficult. And this leads to issues when reporting GIKs. To make reports more transparent and better sources of a nonprofit’s true financial standing, the Financial Accounting Standards Board (FASB) made changes.

This article is a brief overview of the latest update and how this change affects your nonprofit.

How to Report Gifts in Kind

In September 2020, FASB announced Accounting Standards Update (ASU) 2020-07 or Topic 958. According to ASU 2020-07, nonprofits are to report each GIK as a separate line item. Meaning, GIKs should not be included with cash contributions or with other financial assets.

Furthermore, nonprofits should classify each GIK using the standard GIK categories. And from there, nonprofits are to use a table, narrative or both to provide information about each one received.

We’ve listed below the details imperative to reporting each GIK. These were outlined in ASU 2020-07, and we’ve place them here for your convenience.

When reporting, include:

  • Information about how the GIKs were used or monetized during the reporting period
  • Any policies of the nonprofit for monetizing (rather than using) GIKs
  • Any restrictions by the donor about monetizing or using GIKs
  • An explanation of the valuation techniques and inputs used to calculate fair value when the GIKs were first received
  • A description of the principal or most advantageous market used to determine fair value of a GIK when the nonprofit is not allowed to sell or use the GIK due to restrictions by the donor

When 2020-07 is Effective

This article is particularly relevant in 2022. Because, this FASB update is effective for fiscal years ending June 30, 2022 or calendar years ending December 31, 2022. So, the time for your nonprofit to learn more about this GIK change is NOW.

Are Taxes Affected by 2020-07?  

A reminder, this FASB change only affects reporting GIKs in financial statements. This ASU does not affect tax rules. For tax purposes, you should continue providing donor acknowledgments.

How We Can Help

ASU 2020-07 was issued for more transparency in the financial statements of nonprofits. If your nonprofit regularly undergoes audits – an independent audit each year, certified financial statements or requirements from grants or donor agencies – you should speak to one of our nonprofit experts.

We’d love to assist you with these changes. As a nonprofit, you have a lot on your plate. Many of these things are tasks only you can do. But, accounting is our specialty and not one you have to tackle alone as an organization. Let us help.

Use the form below to start a conversation with one of our nonprofit experts.

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