NPO - Recognition of Donation (Computers)

[Simbonile]

Good day team
I’m dealing with a Not for Profit Organisation (NPO). The NPO had computers donated to it about a year ago. No documentation has been maintained. I would like to find out if I should go to a computer shop and check what the price was at the time of danation and journalise this transaction into the books i.e. recognise the asset/ contribution income and depreciation/ accumulated depreciation?

Is it an option to just write under the “Notes” that “Donations in kind are not recognised as income”?

Please advise.
Simbo

[NTH]

Hi.

I had a similar issue with a client.

It all goes down to the accounting policies adopted by the client. And how the client wishes to treat donations-in-kind.
Usually an NPO has entity-specific accounting policies based on IFRS for SME.
However, there are certain large NPO's who are accountable to the public that adopts IFRS for SME.
IFRS is primarily aimed at profit-making entities who have public accountability (IFRS for larger accountability, IFRS for SME for smaller).

I account for donations-in-kind as part of the NPO's revenue stream as it is in the nature of the NPO to receive donations in any form if their accounting policy says so.
Therefore [Dr. Asset ; Cr. Revenue].
The value will be based on the market value of the item at the date of donation (if not provided, I obtain a value from reliable sources or sites for an item of similar age, nature etc].
From there I depreciate etc.

Disclosing the method of how I valued the item depends on the materiality of the donation.
If the donation is material in nature and amount, and will affect the decision making of the users of the AFS, then I will add a note to mention the method and the amount either in PPE or as part of the accounting policies.

At the same time, there are tax consequences.
The donation will be added as part of taxable income for it is a donation-in-specie depending on its nature.
It can also be considered capital to SARS and not form part of taxable income.
(I'd like some clarity on this part though, if anybody can assist).


There are some guidelines out there to have a look at.
GRAP 23, and ACCA's guideline for non-profit entities.
Have a look at the Revenue for Non-Exchange transactions too.

I hope it makes sense and I'd love to know if any other treatment exists for my own understanding too.
Thanks.

[Achmat Kazie]

Regarding your tax query.

If the NPO is registered with SARS as a PBO it would be exempt from Income Tax under certain conditions. The donations in kind would form part of the income of the PBO that would be exempt from income tax.

[NTH]

Regarding your tax query.

If the NPO is registered with SARS as a PBO it would be exempt from Income Tax under certain conditions. The donations in kind would form part of the income of the PBO that would be exempt from income tax.

Indeed. I agree with this.
Thanks.

[Simbonile]

Thank you very much guys, thank you for the detailed response NTH