Not-for-profit organizations receive contributions in many shapes and forms. Over the years, stakeholders have expressed concerns regarding not-for-profit organizations and their lack of transparency surrounding contributed nonfinancial assets, such as fixed assets, supplies, materials and intangible assets. To improve transparency and minimize inconsistencies in reporting, the FASB issued ASU 2020-07 Presentation and Disclosures by Not-for-Profit Entities for Contributed Nonfinancial Assets in September 2020.
ASU 2020-07 requires a not-for-profit organization to present contributed nonfinancial assets as a separate line item in the statement of activities, apart from contributions of cash and other financial assets. The ASU also requires enhanced disclosures around contributed nonfinancial assets, including the following:
- A disaggregation of the amount of contributed nonfinancial assets recognized in the statement of activities by category that depicts the type of contributed nonfinancial assets.
- For each category of contributed nonfinancial assets, the organization must present:
- Qualitative information about whether the nonfinancial assets were monetized or used during the reporting period; if used, an organization will disclose a description of the programs or other activities in which those assets were used.
- The organization’s policy about monetizing rather than using contributed nonfinancial assets.
- A description of any donor imposed restrictions associated with contributed nonfinancial assets.
- A description of the valuation techniques and inputs used to arrive at a fair value measurement at initial recognition.
- The principal market used to arrive at a fair market measure, if it is a market in which the organization is prohibited by a donor imposed restriction from selling or using the contributed nonfinancial asset.
In current conditions, not-for-profit organizations are looking for ways to increase contributions and are more willing to accept contributions of nonfinancial assets with or without donor imposed restrictions. With the issuance of ASU 2020-07, not-for-profit organizations will need to be ready to inform stakeholders, including potential donors, of their policies for monetizing rather than using these contributed nonfinancial assets to further support their mission.
Contact Tina Dzik at firstname.lastname@example.org or a member of your service team to discuss this topic further.
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Cohen & Company is not rendering legal, accounting or other professional advice. Information contained in this post is considered accurate as of the date of publishing. Any action taken based on information in this blog should be taken only after a detailed review of the specific facts, circumstances and current law.