Substantiating Contributions of $250 or More
Verifying contributions of $250.00 or more by churches and non-profits demands special consideration. Incorrect or lack of timely statements regarding contributions can cause loss of credit on donor’s tax returns.
A donation of $250 or more requires a written acknowledgement which includes:
- The amount of cash or a description of property for donated items other than cash.
- Mention if goods or services, in whole or in part, were part of the consideration.
- A description and good faith estimate of the value of any goods or services. See table below for a more defined explanation.
Substantiating contributions have to be “contemporaneous” meaning, it needs to be received by the taxpayer on or before the date the taxpayer files a return for the taxable year in which the contribution was made or the due date if an extension for filing their return was received.
See more details at Church Law & Tax.
FASB Releases New Accounting Standard for Not-For-Profits
On August 18, 2016, the Financial Accounting Standards Board (FASB) issued a standard that affects all not-for-profit entities issuing GAAP-basis financial statements. The new standard simplifies and improves how a not-for-profit entity classifies its net assets as well as the information it presents in financial statements and notes about its liquidity, financial performance and cash flows in hopes to better communicate their financial performance and condition to their stakeholders.
The standard is effective for annual financial statements issued for fiscal years beginning after December 15, 2017, and for interim periods within fiscal years beginning after December 15, 2018. Application to interim financial statements is permitted but not required in the initial year of application. Early application of the amendments in this update is also permitted.
Why a New Standard?
The former standard has held up well for more than 20 years, however, the FASB’s Not-for-Profit Advisory Committee and other stakeholders have reported that they could still be improved to provide better information to users of not-for-profit financial statements.
What Does the Standard Do?
Requires not-for-profits to improve their presentation and disclosures.
Fosters the provision of more relevant information about their resources (and the changes in those resources) to financial statement users.
Generally, the qualitative and quantitative requirements fall in the following areas:
- Net asset classes
- Investment return
- Liquidity and availability of resources
- Presentation of operating cash flows
What are the Benefits?
By simplifying the face of the financial statements and enhancing the disclosures in the notes, not-for-profits will provide more relevant information about their resources and the changes in those resources.
This will be helpful to donors, grantors, creditors and other users, in assessing a not-for-profit’s:
- Availability of resources to meet cash needs for general expenditures
- Liquidity and financial flexibility
- Financial performance
- Service efforts and ability to continue providing services
- Execution of its stewardship responsibilities and other aspects of its management’s performance
This standard is actually the first phase of the FASB’s project to improve financial statements for not-for-profit organizations.
The second phase of the project is expected to address issues such as:
- The requirement and/or definition of a measure of operations
- The realignment of certain line items in the statement of cash flows to better match a required measure of operations
- Whether or not segment reporting is a viable alternative to an analysis of expenses by nature and function for business-oriented health care not-for-profits.
On behalf of FASB, I am looking forward to answering questions our stakeholders may have on the standard. In the meantime, you can find more information on the standard on the FASB website.
Article on FASB is from AICPA Insights
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