In general, the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 958-605-30-11 states that gifts-in-kind should be measured at fair value at the time of donation, assuming the gift has a future economic benefit or service potential for the organization. In some cases, determining fair value of a donated item may be relatively simple, but for others it could require some effort from the organization when there is no readily available market. When determining fair value, organizations should follow the guidance in FASB ASC Topic 820, Fair Value Measurement, which provides a fair value framework.
Following are a couple of examples for how to arrive at a fair value for tangible gifts-in-kind:
- A not-for-profit received donated food from their local government as part of pandemic relief. To properly record these contributions, the organization should value the food based on estimated sales prices for similar items.
- Your organization receives furniture for office space. Furniture can be valued using public information available for similar items, such as auction websites or catalogs.
Useful resources to assist organizations in valuating tangible gifts-in-kind include researching online prices for similar items using valuation databases created by third parties (e.g. Salvation Army’s Donation Valuation Guide, U.S. Department of Agriculture Data Products or IRS Publication 561, “Determining the Value of Donated Property”.
Intangible gifts-in-kind, such as contributions of advertising space in a newspaper or magazine should be measured at fair value based on the cost of purchasing a similar advertisement with the same agency. In order to be considered a contribution, the organization should have some involvement in the design, content and placement of the advertisement.
In addition, cryptocurrency has become one of the most discussed forms of intangible gifts amongst organizations. Organizations should consider implementing a gift acceptance policy for cryptocurrency, discussing the implications of processing and accepting gifts of cryptoassets, and research the requirements of financial and tax reporting. For more on accepting gifts of cryptocurrency, see our recent article, Gift acceptance: three considerations for cryptoassets.