What Is ASU 2020-07, and What Does It Mean for In-Kind Gifts?

ASU 2020-07 is a FASB accounting standard that changed how nonprofits have to report contributed nonfinancial assets, meaning in-kind gifts of goods, services, and use of property, in their financial statements. It requires these gifts to be shown as a separate line item, broken down by category, and accompanied by disclosures about how the organization used them, whether donors restricted their use, and how the organization arrived at their value. If your organization takes in goods, this standard almost certainly already applies to you.

When it took effect

ASU 2020-07 applies to fiscal years beginning after June 15, 2021, with interim reporting periods beginning after June 15, 2022. Comparative financial statements have to reflect it retroactively for periods after June 15, 2020. In practice, this means the standard has been in effect for every nonprofit's annual financial statements for several years now, this isn't a future change to prepare for, it's a current compliance requirement most organizations are already living under, whether or not their staff would describe it that way.

What actually changed

Before this standard, many nonprofits lumped contributed nonfinancial assets in with cash contributions on their financial statements, or disclosed them thinly enough that a reader couldn't tell what was actually donated or how it was used. ASU 2020-07 requires a few specific things:

A separate line item. Contributed nonfinancial assets can no longer be combined with cash gifts on the statement of activities. They need their own line.

A breakdown by category. The organization has to disclose what kinds of nonfinancial assets it received, food, medical supplies, professional services, use of facilities, and so on, not just a single combined figure.

Disclosure of how it was used. Whether the item was used in programs, sold, or otherwise disposed of, and if used, which program it supported.

Disclosure of donor restrictions. Whether the donor placed any restriction on how the gift could be used.

Disclosure of valuation methods. What methodology and what market or other inputs were used to arrive at the value recorded for the gift.

Why this standard exists

The change came out of concern, raised most prominently around donated pharmaceuticals, that some organizations were reporting the value of contributed nonfinancial assets using inflated or non-representative figures, making financial statements harder to interpret accurately. Requiring more granular disclosure and a clear description of valuation methodology was meant to make it harder for a nonprofit's in-kind reporting to overstate the real economic substance of what it received, intentionally or otherwise.

What this means operationally, not just on paper

The accounting requirement has a practical downstream effect most nonprofits feel before they think about it in accounting terms: you can't produce these disclosures from memory or a rough estimate at year-end. You need, for every in-kind gift received during the year, a category, a usage record, a note on any donor restriction, and a defensible valuation basis. That's a real record-keeping burden if goods arrive through a spreadsheet-and-shared-inbox process, where the connection between "this specific item arrived" and "here's what we did with it" often lives in someone's memory rather than a system.

This is where the operational and the accounting problem meet. A nonprofit that can't reliably match a delivered item back to what happened to it doesn't just have a donor-relations gap, it has a harder audit. Systems that photo-verify arrival and log what was received, tied to a specific gift, produce exactly the kind of record this standard asks an auditor to see. Givelink's platform generates that record automatically as gifts arrive and get verified, which doesn't replace a conversation with your accountant about valuation methodology, but it does mean the underlying data for that conversation already exists instead of needing to be reconstructed at year-end.

What to actually do about it

Talk to your organization's CPA or auditor about how your current financial statements handle contributed nonfinancial assets, if that conversation hasn't already happened. This is accounting and audit guidance specific to your organization's situation, not something to implement from a blog post. What you can do independently, starting now, is make sure your in-kind intake process captures category, program use, and any donor restriction at the point the gift arrives, rather than trying to reconstruct that information months later from partial records.

FAQ

Does ASU 2020-07 apply to small nonprofits, or only large ones? It applies to any nonprofit that prepares financial statements under US GAAP and receives contributed nonfinancial assets, regardless of size. Smaller organizations sometimes have less formal reporting obligations depending on their audit or review requirements, which is a question for your CPA, but the standard itself doesn't carve out an exemption by organization size.

Does this standard change how much a donated item is worth for tax purposes? No. ASU 2020-07 is a financial reporting and disclosure standard, not a valuation rule and not tax guidance. Valuation methodology and tax treatment of in-kind gifts are separate questions to raise with a qualified accountant.

What counts as a "contributed nonfinancial asset" under this standard? Donated goods, use of facilities or equipment, and donated services that meet the criteria for recognition (generally, services that create or enhance a nonfinancial asset, or that require specialized skills and would otherwise have been purchased). Ask your auditor which specific gifts your organization received qualify.

What happens if a nonprofit hasn't been complying with this standard? That's a conversation for your auditor or CPA, not something to diagnose independently. The practical first step is usually improving the intake records for in-kind gifts going forward, since better records make catching up on prior periods more tractable.

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This is general information, not accounting or legal advice. Talk to your nonprofit's CPA or auditor about how ASU 2020-07 applies to your specific financial statements. See how photo-verified in-kind gift records work at givelink.app/charities.