Financial Statements Must Reflect Services Donated from Affiliates– April 15, 2015

As a way to conserve precious resources, not-for-profits often share or “pool” personnel/services such as accounting, legal, HR or payroll with a for-profit affiliate. This often occurs at no cost to the not-for-profit. Accounting Standards Update 2013-06 (Services Received from Personnel of an Affiliate), discusses amendments to the FASB Accounting Standards Codification and provides revenue recognition guidance for not-for-profit entities that receive such contributed services.

Previously, not-for-profit entities were not required to recognize contributed services from an affiliated entity unless those services met a specific, fairly narrow set of criteria. The new guidance states that not-for-profits that receive donated services from a related entity must now include those donated services in their financial statements. These services should be shown at the cost at which the affiliate entity would record them.

If not already doing so, not-for-profits should begin tracking the costs of these donated services. The guidance does not require a specific tracking method, just one that is “reasonable and verifiable.” Services should be recorded in the same manner in which other donated services are recorded — as a decrease in net assets (an expense) or, if donated services are used to create or enhance assets, as an increase in assets.

The amendments are effective prospectively for fiscal years beginning after June 15, 2014. A modified retrospective approach also can be used, in which all prior periods presented are adjusted, but no adjustment is made to the beginning balance of net assets.

Contact Donna Jenkins, CPA, at or a member of your service team if you have questions on this development.