In-kind donations—also called gifts-in-kind—are non-cash contributions of goods or services. GAAP requires nonprofits to report them at fair market value (FMV), on a separate line item of the Statement of Activities for contributed nonfinancial assets. Beyond that, nonprofits must disclose how these donations were used, how they were valued, and whether donor restrictions apply.

Because these gifts can range from legal services to donated equipment, recording them properly isn’t always straightforward. Below are practical guidelines and pro tips to help nonprofits stay compliant and transparent.

What Counts as an In-Kind Donation?

• Good or Professional Services: If you receive goods or services you would normally pay for, it qualifies. Example: A parent-owned catering company provides camp meals free of charge. 
• Specialized Volunteer Work: Volunteer hours count only if professional skills are used. Example: A board member who’s a lawyer reviews bylaws at no cost. 

What Does NOT count?

• Conditional Gifts: Donations with “strings attached” do not  Example: A printer donated solely for marketing purposes does not meet in-kind standards. 

Pro Tip: Always ask: Would we have purchased this if it weren’t donated? If yes, it likely qualifies.

Key Reporting Requirements

• Recognize at FMV: Record the donation’s value when received.
• Categorize Contributions: Common categories include fixed assets, materials/supplies, professional services (legal, accounting, consulting, web design), and intangibles.
• Separate Line Item: Report separately from cash contributions.
• Disclose Usage: Explain how the asset or service was used.
• Document Valuation: Disclose methods used to determine FMV.
• Note Restrictions: Report any donor-imposed limitations.

Determining Fair Market Value

• Tangible Goods: Use market or comparable item pricing.
• Professional Services: Use standard hourly rates or salaries.
• Unique Items: For art or collectibles, request a donor estimate or obtain an independent appraisal (required if >$5,000).

Pro Tip: Keep supporting documentation (invoices, appraisals, market data) on file—auditors will ask.

How to Record In-Kind Donations

1. Journal Entry: Record FMV as both revenue and an offsetting expense (or asset acquisition).
   • Example: Donated legal services → Contribution Revenue & Professional Services Expense.
2. Disclosures: In the financial statement footnotes, include:
   • Types of in-kind donations received.
   • How services or assets were used.
   • Valuation methods.
   • Any conversions to cash (if items were sold).

Bottom Line:
In-kind donations can significantly support your nonprofit’s mission, but only if recorded correctly. Following GAAP requirements ensures transparency, builds donor trust, and strengthens your financial reporting. Use our In-Kind Accounting Checklist, or leave a comment below if you have any questions. I’m happy to help!