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Three Common Mistakes Not-for-Profits Make with Gift-in-Kind Valuation

Gifts come with many benefits for not-for-profit organizations. They can help a not-for-profit extend the reach of its programs or enhance its mission with resources the organization could not have otherwise been able to afford. Gifts-in-kind (GIK) include contributions of tangible and intangible property. The downside to gift-in-kind contributions is they can also be difficult to value.

FASB ASC 820 Fair Value Measurements applies to GIKs just as it does to all other assets and investments. Because GIKs are often given and distributed at free or reduced rates, they may not always have a clear-cut valuation method.

Mistakes in determining the value of a GIK can carry consequences. If not-for-profits do not appropriately value their gift contributions, they could be in a situation with an inflated efficiency ratio or material misstatements on their financial statements.

In this MHM Messenger, we highlight three areas where mistakes commonly occur with GIK valuation. We recommend not-for-profit organizations review these topics and their effect on the valuation process for their organization’s particular situation.

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