Tuesday, April 29, 2014

Accounting for Your Volunteers, Literally!

by Alerding CPA Group - Tyler Kleinschmidt

Not-for-profit entities rely heavily on volunteers and a variety of contributed goods and services to fulfill their mission. The Financial Accounting Standards Board (“FASB”), which sets the rules regarding accounting and financial reporting, outlines criteria that govern whether or not a contributed service should be recognized in the financial statements. However, there is still debate as to whether these guidelines allow for the most accurate reflection of the activities within the financial reporting framework.
The first criteria for recognition states that if the services create or enhance a nonfinancial asset the contributed services would be recognized in the financial statements.
The second criteria for recognition is that the service contributed must be one that requires a specialized skill. This in itself is subjective based on what an Organization considers a specialized skill. The FASB suggests that services requiring specialized skills are provided by individuals with a certain level of expertise (teachers, attorney’s, lawyers, etc) and the services would have to be purchased if not donated. Even though this narrows the range, issues arise due to the volume of contributed services that can fall outside these standards.

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