The Financial Accounting Standards Board (FASB) issued a proposed Accounting Standards Update (ASU) aimed at improving transparency around how nonprofits present and disclose contributed non-financial assets, or gifts-in-kind (GIK).
The proposed ASU would require nonprofits to present contributed non-financial assets as a separate line item in the statement of activities, apart from contributions of cash or other financial assets. Stakeholders are encouraged to review and provide input on the proposed update by April 10.
Contributed non-financial assets can include fixed assets (land, buildings, and equipment), materials and supplies (food, clothing and pharmaceuticals), and intangible assets and/or recognized contributed services.
The proposed ASU also would require nonprofits to disclose contributed nonfinancial assets received, disaggregated by category that depicts the type of contributed nonfinancial assets.
For each category of contributed non-financial assets received, nonprofits would have to disclose “qualitative information about whether the assets were or are intended to be either monetized or utilized during the reporting period and future periods (and, if utilized, a description of the programs or other activities in which those assets were or are intended to be used);” a description of any donor restrictions associated with the contributed assets; and, valuation techniques and inputs used to arrive at a fair value measure, including the principal market (or more advantageous market) if significant,” in accordance with the requirements in Top 820, Fair Value Measurement.”
Donated pharmaceuticals often garner the most attention, particularly from regulators, who have been known to take issue with how charities value pharmaceuticals sent overseas.
Legislation proposed last year in California took aim at the nonprofit valuations of GIK, particular pharmaceuticals. A.B. 1181 passed the Assembly and Senate before being vetoed by the governor in October. It had the support of Attorney General Xavier Becerra, who has sued several charities over pharmaceutical valuations since succeeding U.S. Sen. Kamala Harris in 2017.
For more information about the proposal, or to submit comments, visit www.fasb.org
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