Where does the time go? Valuing donated services provided to nonprofit organizations

It has become more and more prevalent for nonprofit organizations to receive contributions of time and services in lieu of money. However, unlike donated cash which is always recognized, donated services do not always find their way onto a nonprofit’s financial statements. According to the Financial Accounting Standards Board, nonprofit organizations may only record two kinds of donated services: (1) services that create or enhance a nonfinancial asset and (2) services that require special skills, are provided by persons possessing those skills, and would have to be purchased if not donated.

A service that creates or enhances a nonfinancial asset is a service that adds nonmonetary value to something the organization owns, i.e., construction of a new building or leasehold improvements to an existing building that would be capitalized at the date of the donation and depreciated over time. However, services donated to maintain or repair a building would not be recorded because they do not add any value to the asset.

A service that requires special skills is most commonly a service that requires specialized schooling or training or even a license to practice, i.e., attorney services, accountants, doctors, etc. It is also important to remember that these specialized services would have to be purchased if not donated. These services are recorded as income at fair value and expensed at the same amount.

Donated services not meeting one of these two criteria should not be recognized financially by a nonprofit organization. However, a footnote disclosure describing unrecognized service contributions is permitted and encouraged to help financial statement users assess ongoing success and the long-term viability of an organization. It is recommended that you talk to your accountant if you have further questions regarding this topic. Our Nonprofit Team is available as a resource to guide your organization through nonprofit financial reporting.

Source: FASB ASC 958/Thomson Reuters Checkpoint 203


Jeffrey M. Walker, CPA

Senior Manager

Jeff is a Senior Audit Manager at Brown Schultz Sheridan and Fritz. He earned his Bachelor of Science degree in Business and Accounting from Clarion University of Pennsylvania. Jeff has 12 years of public accounting experience with a broad range of clients.