A woman and man who work for a nonprofit talking with their CPA auditor during their nonprofit annual audit


A new accounting standard issued by the Financial Accounting Standards Board (FASB) may affect your next nonprofit annual audit. Accounting Standards Update No. 9 2020-07  Not-for-Profit Entities (Topic 958): Presentation and Disclosures by Not-for-Profit Entities for Contributed Nonfinancial Assets changes how nonprofit organizations present and disclose contributed nonfinancial assets. Nonprofit organizations will need to review this guidance carefully to determine how it may impact their financial statements and the auditor’s report. To better understand this new standard, let’s discuss the key provisions of ASU 2020-07 (Topic 958) and how they may affect your future nonprofit audits.


Gifts In Kind Related To Your Nonprofit Annual Audit

Gifts-in-kind (GIK) are non-cash donations of goods or services. Nonprofits often receive GIK from individuals, businesses, and other nonprofit organizations. FASB ASU 2020-07 (Topic 958) outlines updated accounting standards for reporting GIK. The new guidance aims to improve nonprofit financial reporting by providing stakeholders with a clear picture of an organization’s GIK activities. This update will provide transparency and consistency in financial statements of all donations, how they are used, and how they are valued.


New Requirements for Future Nonprofit Audits

Most changes related to ASU 2020-07 (Topic 958) will impact disclosure requirements in the notes of audited financial statements. Nonprofits will have to report GIK as a separate line item in the Statement of Activities, apart from financial assets. During preparation for a nonprofit annual audit, each contributed nonfinancial asset must disclose the following in the notes of the financial statement:

  • Qualitative information assessing whether contributed nonfinancial assets were either monetized or used during a reporting period. If the nonprofit reports that the nonfinancial assets were used, then the organization must disclose a description of the program or other activities in which they were used.
  • The method used to measure the contributed nonfinancial asset at fair value, under the requirements in FASB ASC 820, Fair Value Measurement, specifically FASB ASC 820-10-50-2-(bbb) (1), at initial recognition.
  • The nonprofit’s policy regarding monetizing rather than utilizing contributed nonfinancial assets.
  • A description of donor-imposed restrictions (if applicable) placed on the contributed nonfinancial assets.
  • The principal market (or most advantageous market) used to arrive at a fair value measure if it is a market in which a donor-imposed restriction prohibits the recipient NFP from selling or using the contributed nonfinancial assets.


Effective Date and Transition

In most cases, ASU 2020-07 (Topic 958) will be applied on a retrospective basis for annual reporting periods beginning after June 15, 2021, and interim periods within annual periods beginning after June 15, 2022. Early adoption of ASU 2020-07 (Topic 958) is permitted. 



As you prepare for your next nonprofit or 501c3 audit, review this new FASB standard with an accounting firm with expertise in nonprofit auditing. Our nonprofit auditors and nonprofit accounting professionals at Assurance Dimensions have a proven track record in nonprofit audits. We can help your organization understand and apply these new accounting changes. Contact us today to learn more.


A nonprofit team discussing their upcoming nonprofit annual audit at a large table