KPM

Non-Profit Restructuring Inflation Reduction Mission changes Reimbursement Policy Protecting Your Non-Profit Against Financial Threats Non-Profit Retirment Plan Look Internally To Fill Non-Profit Guide To Planned Giving Financial Statement Auditing Process Flexible Budget Rules Of Form W-9 Potential Obstacles Of Going Global Advertising Payments To Non-Profits Searching For New Staffers Operate Your Non-Profit 501(c)(6) Board Meeting Minutes Planned Gifts Diversity For-Profit Subsidiary IRS Compliance Merging Non-Profits Return a donation Internal Controls Term Limits Pay transparency Accountable Plan Fundraising Disaster Plan Audit Conflict-Of-Interest HR Function Volunteer Risk non-profit tax reporting Cryptocurrency Donations Culture

Valuing & Reporting Gifts In Kind & Donated Services

Non-profit organizations do not receive only cash donations. Your support also likely comes in the form of gifts in kind and donated services. Even when such gifts are welcome, it can be challenging to determine how to recognize and assign value to them for financial reporting purposes.

Recording gifts in kind

Gifts in kind generally are pieces of tangible property or property rights. They may take many forms, including:

  • Free or discounted use of facilities
  • Free advertising
  • Collections, such as artwork to display
  • Property, such as office furniture or supplies

To record gifts in kind, determine if the item can be used to carry out your mission or sold to fund operations. In other words, does it have a value to your non-profit? If so, it should be recorded as a donation and a related receivable once it is unconditionally pledged to your organization.

To value the gift, assess its fair value or what your organization would pay to buy it from an unrelated third party. In many cases, it is easy to assign a fair value to property, but when the gift is a collection or something that does not otherwise have a readily determinable market value, its fair value is more difficult to assign. For smaller gifts, you may need to rely on a good faith estimate from the donor. However, if the value is more than $5,000, the donor must obtain an independent appraisal for tax purposes, which will give you documentation for your records.

Recognizing donated services

The fair value of a donated service should be recognized if it meets one of two criteria:

  1. The service creates or enhances a non-financial asset. Such services are capitalized at fair value on the date of the donation. These types of services either create a non-financial asset (in other words, a tangible asset) or add value to an asset that already exists.
  2. The service requires specialized skills, is provided by persons with those skills, and would have been purchased if it had not been donated. These services are accounted for by recording contribution income for the fair value of the service provided. You also must record it as a related expense, in the same amount, for the professional service provided.

Beyond the basics

These are only basic guidelines to recognizing and valuing gifts in kind and donated services. For more comprehensive information about handling these gifts, contact us.

Related Articles

Talk with the pros

Our CPAs and advisors are a great resource if you’re ready to learn even more.