Article updated August 2026.
The Generally Accepted Accounting Principles (GAAP) requirements for the reporting of gifts in-kind have been in existence for a number of years. In June 2018, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2018-08, Not-for-Profit Entities (Topic 958): Clarifying the Scope and the Accounting Guidance for Contributions Received and Contributions Made. This Standard primarily clarified the accounting for contributions received and contributions made, including determining whether a contribution is conditional. The guidance also clarified the distinction between contributions and exchange transactions.
To help supplement their cash resources, many nonprofit entities rely heavily on donors for contributions, which can be classified as either financial or in-kind, i.e., nonfinancial assets. Financial contributions are commonly received in the form of grants, pledges, or monetary donations and are received by the organization through a transfer of cash or other financial assets from the donor. In-kind contributions are nonfinancial assets, including goods or services received at no cost or below market cost. Nonfinancial assets can include tangible items such as food, clothing, medical or other supplies, furniture, and intangible items such as donated services, voluntary labor, and the use of facilities.
Some of the most frequently overlooked gifts in kind include contributions of advertising time, technical services, use of facilities, costs associated with fundraising events, collection items, donated vehicles, and borrowings at below market interest rates.
Accounting for Contributed Services
Contributed services are recorded in an organization’s financial statements when they meet the recognition criteria established by GAAP. Under ASC 958-605, there are two circumstances in which contributed services are recognized as revenue.
First, contributed services are recognized when they create or enhance a nonfinancial asset. For example, an electrician donating services to construct or improve a building owned by the nonprofit may qualify for recognition because the services create or enhance a nonfinancial asset belonging to the organization.
Second, contributed services are recognized when the services require specialized skills, are provided by individuals possessing those specialized skills, and would typically need to be purchased by the organization if the services were not donated. Examples of individuals who may provide qualifying services include accountants, architects, carpenters, doctors, electricians, lawyers, nurses, plumbers, teachers, and other professionals and tradespeople.
When evaluating donated services, organizations should focus on the nature of the services provided and whether the applicable GAAP criteria have been met. Not all volunteer or donated services qualify for recognition. For example, general volunteer services provided by individuals without specialized skills generally would not be recognized as contribution revenue. However, such services may still be subject to disclosure requirements, as discussed below.
When contributed services meet the recognition criteria, the organization generally records contribution revenue at fair value with an offsetting expense or, when applicable, an addition to a capital asset. For example, if an electrician donates qualifying services as part of a construction project and the services would otherwise have been purchased by the organization, the organization would recognize contribution revenue and capitalize the related cost if the expenditure meets its capitalization policy.
There is a common misconception among nonprofits that because in-kind donations are provided at little or no cost, the organization does not have to report them on its financial statements. Stakeholders and other readers of the financial statements might argue that recording these items merely grosss-up revenue and expenses with no effect on operating results. Conversely, not recording qualifying in-kind contributions can distort an organization’s financial statements by understating revenue and expenses and can make meaningful comparisons between similar organizations more difficult.
Accordingly, nonprofit organizations should establish processes to identify, document, value, and appropriately account for qualifying contributed nonfinancial assets and services.
Recognition and Measurement of Contributed Nonfinancial Assets
GAAP requires an organization to recognize qualifying contributed nonfinancial assets at fair value when the contribution is received. Contributed nonfinancial assets are accounted for under ASC 958-605 and measured at fair value in accordance with ASC 820, Fair Value Measurement. Fair value is generally the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
The determination of fair value is often one of the most challenging aspects of accounting for gifts in kind. Organizations should maintain sufficient documentation to support the valuation methodology used, including consideration of the nature and condition of the donated asset, the market in which the asset could be sold or used, and any donor-imposed restrictions.
When a donated item qualifies for recognition and is used by the organization, the contribution is generally recognized as contribution revenue with an offsetting expense in the appropriate natural expense category. If the contributed asset meets the organization’s capitalization policy, the organization records the asset on the statement of financial position rather than recording an immediate expense.
For example, assume an organization receives donated equipment with a fair value of $25,000 and the equipment exceeds the organization’s capitalization threshold. The organization would recognize contribution revenue of $25,000 and record the equipment as a fixed asset. The asset would subsequently be depreciated in accordance with the organization’s accounting policies.
Organizations should also consider whether donor-imposed restrictions affect the classification of the contribution as with or without donor restrictions. A restriction on the use of a contributed nonfinancial asset does not necessarily prevent recognition; rather, the restriction should be evaluated under the applicable contribution accounting guidance.
FASB Accounting Updates Since 2018
In August 2020, the FASB issued Accounting Standards Update No. 2020-07, Not-for-Profit Entities (Topic 958): Presentation and Disclosures by Not-for-Profit Entities for Contributed Nonfinancial Assets. The purpose of the ASU was to increase transparency surrounding contributed nonfinancial assets by requiring enhanced presentation and disclosure. The ASU did not change the existing recognition and measurement requirements for contributed nonfinancial assets under ASC 958-605.
The amendments became effective for annual periods beginning after June 15, 2021, and interim periods within annual periods beginning after June 15, 2022. The standard is therefore fully effective for nonprofit organizations and should be reflected in current financial statements.
Under ASU 2020-07, contributed nonfinancial assets must be presented separately from other contributions in the statement of activities. In addition, nonprofit organizations are required to provide enhanced disclosures in the notes to the financial statements.
The required disclosures include:
- The amount of contributed nonfinancial assets recognized in the statement of activities, disaggregated by category that depicts the type of contributed nonfinancial asset. Examples may include food, clothing, medical supplies, fixed assets, use of facilities, and contributed services.
- The organization’s policy, if any, regarding monetizing rather than utilizing contributed nonfinancial assets.
- Qualitative considerations to be disclosed include:
- Whether the contributed nonfinancial assets were monetized or utilized during the reporting period. If the assets were utilized, the organization should describe the programs or other activities in which the assets were used.
- A description of any donor-imposed restrictions associated with the contributed nonfinancial assets.
- A description of the valuation techniques and inputs used to arrive at the fair value measurement at initial recognition.
- The principal market, or most advantageous market when applicable, used to determine fair value when that market is one in which the recipient nonprofit is prohibited by a donor-imposed restriction from selling or using the contributed nonfinancial asset.
Disclosure of Contributed Services
ASU 2020-07 also enhanced the disclosure requirements related to contributed services. An organization that receives contributed services is required to disclose information about the programs or activities for which the services were used, including the nature and extent of contributed services received during the period and the amount of contributed services recognized as revenue.
Importantly, disclosure of contributed services is required regardless of whether the services meet the GAAP criteria for recognition as contribution revenue. Therefore, an organization may have contributed services that are recognized as revenue in the financial statements as well as other contributed services that are disclosed but not recognized.
For contributed services that do not meet the recognition criteria, an organization may describe the nature and extent of the services using nonmonetary information. Examples may include the number of volunteer hours received, trends in donated hours, service outputs provided by volunteers, or other measures relevant to the organization’s activities.
This distinction is particularly important for nonprofit organizations that rely heavily on volunteers. While general volunteer services typically do not qualify for recognition as contribution revenue, the organization should nevertheless consider whether those services are required to be disclosed under ASU 2020-07.
Valuing In-Kind Donations
Determining the fair value of contributed nonfinancial assets is often the most challenging part of the accounting process. Organizations should have a reasonable and supportable methodology for determining the fair value of each significant category of contributed nonfinancial assets.
The valuation methodology should be consistent with the fair value principles contained in ASC 820. Depending on the type of asset, organizations may consider observable market prices, comparable transactions, replacement costs, or other appropriate valuation techniques.
For example, the fair value of donated food may be supported by market prices for similar goods, while the fair value of donated professional services may be based on the prevailing rate for comparable services in the applicable market. Organizations should document the basis for significant fair value estimates and retain appropriate supporting documentation from donors or other sources.
A donor’s statement of the amount it believes an item is worth does not, by itself, necessarily establish the fair value that should be recorded by the nonprofit. The recipient organization is responsible for determining and documenting the appropriate fair value in accordance with ASC 820.
Recent FASB Developments
The FASB has continued to make technical improvements to the Accounting Standards Codification. In December 2025, the FASB issued ASU No. 2025-12, Codification Improvements. The update contains a broad range of technical corrections, clarifications, and other minor improvements across the Codification, including amendments affecting Topic 958. These amendments are intended primarily to improve the clarity and usability of the Codification rather than fundamentally change the accounting model for contributed nonfinancial assets.
Accordingly, the fundamental recognition, measurement, presentation, and disclosure requirements applicable to gifts in kind remain centered on ASC 958-605, ASC 820, and ASU 2020-07.
Conclusion
In-kind donations can provide significant resources to nonprofit organizations, but they also create important accounting and financial reporting considerations. Organizations should maintain appropriate processes to identify contributed nonfinancial assets and services, determine whether the items meet the applicable GAAP recognition criteria, establish supportable fair value measurements, and maintain adequate documentation.
The implementation of ASU 2020-07 has also increased the level of transparency expected in financial statement reporting. Nonprofit organizations should carefully monitor contributed nonfinancial assets and services received throughout the year rather than attempting to identify and value these contributions only at year end.
By maintaining appropriate procedures throughout the year, nonprofit organizations can ensure that qualifying gifts in kind are properly recognized and that required disclosures are complete and accurate.
HBK’s Nonprofit Solutions team members are available to assist nonprofit organizations with the accounting, valuation, presentation, and disclosure considerations associated with in-kind donations and other contributed nonfinancial assets.
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