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Not-for-profit organizations often receive advertising or other promotional materials at no charge in order to help promote their mission or solicit donations.
April 22, 2013

Non-Cash Contribution Considerations – Donated Advertising

Not-for-profit organizations often receive advertising or other promotional materials at no charge in order to help promote their mission or solicit donations. When such nonfinancial assets and services are received free of charge, organizations need to consider whether a contribution should be recorded. Examples of potential non-cash contributions include:

  • Advertising space in a magazine or newspaper or on an internet site
  • Commercial air time or a public service announcement provided by a radio or television station
  • Design services or professional talent services provided by an advertising agency, newspaper, etc.

In order to determine if a contribution for such items or services should be recorded, the level of the organization's involvement in developing the promotional material or advertisement needs to be evaluated. Generally, greater involvement in the process provides stronger evidence that the organization has received a contribution that should be recorded.

Factors that support recording a contribution

  • Suggesting changes to a brochure
  • Providing the organization's logo or other artwork to be used in the advertisement
  • Approving the advertisement before placement

Factors that do not support recording a contribution

  • Providing minimal design input
  • Not participating in ad development
  • Not exercising significant influence over content
  • Advertisement is placed on the organization's behalf without its involvement or consent

Design services, professional talent services and other similar contributed services are considered contributed services and should be recognized as contributions because the services create or enhance nonfinancial assets. On the other hand, advertising space, commercial air time and public service announcements are considered contributed assets (as opposed to contributed services) and should also be recognized as non-cash contributions. In both cases, whether an organization can afford or would otherwise purchase the items is not a factor that should impact the decision to record these items as a contribution.

Once it is determined that a contribution should be recorded, it needs to be recorded at fair value. Factors to consider in determining fair value include:

  • Amounts paid historically for similar advertising
  • Placement of the ad, such as the time of day or position within a website or publication
  • Demographics of and number of viewers of the message

Financial Statement Presentation Considerations – Gross vs. Net Presentation

Generally, the statement of activities should report an organization's gross revenues and expenses unless an event or activity is considered peripheral or incidental. Determining if an activity is peripheral or incidental depends on two factors: 1) frequency and 2) significance of gross revenues and expenses.

Integral activities that produce a significant amount of revenues and expenses in relation to the organization's overall budget should have their gross revenues and expenses reported on the statement of activities. Events that are not regularly held and generate revenues and expenses that are not significant with regard to the organization's overall budget are considered peripheral. Such events can be reflected on a net basis on the statement of activities.

Common examples of revenues that could potentially be reported either gross or net include sales of items and special events. Presentation depends on the integral versus peripheral determination of the underlying activity. For example, an organization that manages a store that is an integral part of its organization would report sales and cost of goods sold separately on the statement of activities. However, if the organization sporadically sells candy once a year as a fundraising event and it is considered a peripheral activity, the net amount earned could be reflected on the statement of activities. Generally, the expenses would be reported parenthetically. Additionally, an organization may report investment income net of related expenses, such as custodial fees and advisory costs.

When net results are shown on the statement of activities, the expense portion should still be reflected separately on the statement of functional expenses in the appropriate functional category. In the aforementioned example, the cost of sales related to selling candy should be reflected on the statement of functional expenses as a fundraising activity. In addition, the costs netted against investment income would be reported as management and general expenses on the statement of functional expenses. Although reporting in this manner means that the functional expense category totals on the statement of functional expenses will not agree to the functional expenses shown on the statement of activities, it ensures all costs are appropriately reported by function. A reconciliation can be added to reflect how these balances are derived.


Under U.S. Treasury Department guidelines, we hereby inform you that any tax advice contained in this communication is not intended or written to be used, and cannot be used by you for the purpose of avoiding penalties that may be imposed on you by the Internal Revenue Service, or for the purpose of promoting, marketing or recommending to another party any transaction or matter addressed within this tax advice. Further, RubinBrown LLP imposes no limitation on any recipient of this tax advice on the disclosure of the tax treatment or tax strategies or tax structuring described herein.

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