Contributions are measured at fair value by both donor and donee. When a gift involves noncash assets, services, promises to give, or other noncash benefits, measurement becomes a significant consideration. ASC 820, Fair Value Measurement, provides authoritative guidance on determining fair value. A high-level overview of the fair value measurement framework is provided here; specific considerations related to different types of contributions are discussed in the sections that follow.

According to ASC 820, fair value is the price that would be received in a hypothetical sale of an asset or transfer of a liability between a willing buyer and a willing seller (the “market participants”) on the measurement date. The ease or difficulty in determining the fair value of an asset using the ASC 820 framework depends on the nature of the asset and whether markets exist for its purchase and sale. For example, the fair value of marketable equity securities that trade publicly on a stock exchange can be easily determined. However, determining the fair value of promises to give, which are financial assets for which no market exists, is more complicated.

For additional information on the fair value measurement framework, see PwC’s Global Guide to Fair Value Measurement (FV). In addition, AAG-NFP chapter 5 and its appendix, Measurement of Fair Value for Certain Transactions of Not-for-Profit Entities, contain extensive discussions on the application of ASC 820 to contributions.