Not-for-profit organizations sometimes receive noncash contributions (also referred to gifts-in-kind or in-kind contributions) in the form of donated goods or property. These noncash contributions can have unique financial reporting requirements.
In general, in-kind contributions that can be used or sold should be recognized at fair value on the date contributed. If the in-kind gift cannot be used or sold, it has no value and therefore should not be recognized.
Fair value is the estimated price in which an item can be sold to a third party under current market conditions. At times, it may be relatively easy to determine fair value; for example if someone donates a computer to your organization you can research the cost online. However, at other times determining the fair value of a in-kind gift may be more difficult; for example, an animal shelter receives pet food that is past its sell date (but is still good for consumption) the food should be valued at some amount below the retail price.
Sources for determining fair value include publishing catalogs, online comparisons, independent appraisals, etc. Wholesale and bulk discounts should be considered when determining fair value. It would typically not be appropriate to record an in-kind gift at the standard retail price if received in bulk. Also, remember that in-kind gifts received as part of an agency transactions are not required to be recorded under U.S. GAAP.