On September 17, 2020, the Financial Accounting Standards Board issued Accounting Standard Update 2020-07, Not-for-Profit Entities (Topic 958), Presentation and Disclosures by Not-for-Profit Entities for Contributed Nonfinancial Assets (the “ASU”). The following is a brief overview of the ASU and how it might affect your organization.
WHO WILL BE AFFECTED?
The ASU will apply to all not-for-profit entities that receive contributed nonfinancial assets.
WHAT ARE THE KEY CHANGES?
The amendments address presentation and disclosure of contributed nonfinancial assets. The amendments in the ASU would require that a not-for-profit entity:
- Present contributed nonfinancial assets as a separate line item in the statement of activities, separate from contributions of cash or other financial assets
- Contributed nonfinancial assets received disaggregated by category that depicts the type of contributed nonfinancial assets
- For each category of nonfinancial assets received:
- Qualitative information about whether the contributed nonfinancial assets were, or are intended to be, monetized or utilized during the reporting period and future periods. If utilized, the not-for-profit would disclose a description of the programs or other activities in which those assets were or are intended to be used.
- The not-for-profit’s policy (if any) about monetizing rather than utilizing contributed nonfinancial assets.
- A description of any donor restrictions associated with the contributed nonfinancial assets.
- The valuation techniques and inputs used to arrive at the fair value measurement, including the principal market, or most advantageous market, if significant.
WHAT DOES THIS MEAN FOR YOU?
The ASU will not change the recognition and measurement requirements for nonfinancial assets acquired. Not-for-profit entities will need to ensure the information required in financial statement disclosures is readily available when financial statements are prepared.
WHEN DOES THE NEW STANDARD GO INTO EFFECT?
The amendments in this ASU should be applied on a retrospective basis and are effective for periods beginning after June 15, 2021. Early adoption is permitted.
WHAT SHOULD YOU DO NOW TO PREPARE?
Consider the need to make any changes to how the accounting is being performed over gifts of nonfinancial assets and whether or not any new general ledger accounts need to be created to help segregate these types of donations from financial assets.