On February 10, 2020 the Financial Accounting Standards Board (“FASB”) issued an Exposure Draft, Not-for-Profit Entities (Topic 958), Presentation and Disclosures by Not-for-Profit Entities for Contributed Nonfinancial Assets (“Proposed ASU”). The following is a brief overview of the proposed ASU and how it might affect your organization.
WHO WILL BE AFFECTED?
The Proposed 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 Proposed ASU would require that a not-for-profit entity:
1. Present contributed nonfinancial assets as a separate line item in the statement of activities, separate from contributions of cash or other financial assets
2. Disclose:
a. Contributed nonfinancial assets received disaggregated by category that depicts the type of contributed financial assets
b. 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.
- 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 Proposed 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 effective date will be determined after the FASB considers stakeholders’ feedback on the proposed amendments. However, the amendments will be applied on a retrospective basis.
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.
KYLE ROBBINS, SENIOR AUDIT MANAGER
RICHARD SCORESBY, TAX PARTNER
For more information on this topic please contact Larson & Company today.