On February 10, 2020, the Financial Accounting Standards Board (FASB) issued a proposed Accounting Standards Update (ASU), Presentation and Disclosures by Not-for-Profit Entities for Contributed Nonfinancial Assets. The proposed amendments are intended to increase transparency around contributed nonfinancial assets, also known as gifts-in-kind, received by not-for-profit entities.
An overview of the proposed amendments follows.
Subtopic 958-605, Not-for-Profit Entities—Revenue Recognition, specifies requirements for the recognition and initial measurement of contributions. It doesn’t, however, include presentation or disclosure requirements for contributed nonfinancial assets other than contributed services.
The proposed amendments would provide new presentation and disclosure requirements for contributed nonfinancial assets, while maintaining the existing recognition and measurement requirements for these assets.
The proposed amendments would require presentation of contributed nonfinancial assets as a separate line item in the statement of activities, apart from contributions of cash or other financial assets.
The proposed amendments would require disclosure of contributed nonfinancial assets received disaggregated by the category that depicts the type of contributed nonfinancial assets in the notes to the financial statements.
For each category of contributed nonfinancial assets received, the proposed amendments would require the following additional disclosures:
- Qualitative information denoting that contributed nonfinancial assets were or are intended to be monetized or utilized during the reporting period and future periods. If utilized, a description of the programs or other activities in which those assets were or are intended to be used must be included.
- A description of any donor restrictions associated with the contributed nonfinancial assets.
- The valuation techniques and inputs used to arrive at a fair value measure, including the principal market or most advantageous market, if significant, in accordance with the requirements in Topic 820, Fair Value Measurement.
Subtopic 958-605 currently requires not-for-profit entities to include disclosures for contributed services, including a description of the programs or activities for which those services were used, as well as the nature and extent of the contributed services received during the period and the amount recognized as revenues for the period.
While these disclosure requirements for contributed services wouldn’t be eliminated, the proposed amendments would have the impact of increasing the required disclosures for recognized contributed services.
Among other items, the FASB seeks feedback on the scope of the presentation and disclosure requirements and whether or not the proposed updates should apply to all contributed nonfinancial assets.
Additionally, the FASB requests specific feedback on if additional education or implementation guidance is needed on the valuation of contributed nonfinancial assets, and if the additional disclosure requirements can be achieved with current systems.
Respondents are also asked to comment on if significant time would be needed to implement the proposed updates.
Comments on the proposed amendments are due by April 10, 2020.
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For more information on how the proposed changes to the presentation and disclosure requirements for contributed nonfinancial assets could affect your not-for-profit organization, contact your Moss Adams professional.