Navigating FASB's New Standards for Gifts-in-Kind

The Financial Accounting Standards Board (FASB) has introduced new guidelines for how non-profit organizations should present and disclose gifts-in-kind (GIK). These changes aim to increase transparency and consistency in financial reporting, which is crucial for non-profits that rely on non-cash contributions.

Key Changes

Critical Changes in Presentation and Disclosure

The updates from FASB are detailed in ASU 2020-07, “Presentation and Disclosures by Not-for-Profit Entities for Contributed Nonfinancial Assets.” Here’s a breakdown of the significant changes:

Separate Line-Item Presentation:
- Non-profits must now present GIK as a separate line item in the statement of activities. This means that all non-cash contributions are clearly distinguished from other types of donations, providing a more transparent view of the organization’s financial position.
Detailed Disclosure Requirements:
- Organizations are required to provide more detailed disclosures about the GIK they receive. This includes:
  - Types of Gifts: A breakdown of the different types of GIK, such as fixed assets, inventory, or professional services.
  - Valuation Methods: Clear explanation of how the fair value of these contributions is determined, ensuring consistency and transparency.
  - Donor Restrictions: Disclosure of any restrictions donors impose on using the contributed assets could affect how these assets are utilized.
Valuation and Fair Value:
- The new standards emphasized the importance of accurate valuation. Non-profits must ensure that the fair value of GIK is recorded at the time of donation, using appropriate and consistent methods. This helps reflect the actual value of these contributions in the financial statements.

Steps for Non-Profits

To comply with these new standards, non-profits should:

Update Accounting Policies: Ensure accounting practices align with the new FASB requirements.
Train Staff: Educate staff on accurately capturing and reporting GIK.

Enhance Record-Keeping: Maintain detailed records of GIK, including valuation methods and donor restrictions.

Conclusion

FASB’s new standards for GIK improve transparency in non-profit financial reporting. By adopting these changes, nonprofits can provide a more precise and accurate picture of their financial health, benefiting stakeholders and enhancing accountability.