Are NFP entities required to account for volunteer time?

Volunteers are used by many NFP organisations. These individual’s donated services and time can assist in the running of the organisation, and are often essential in helping deliver the organisation’s services.

Difficulties exist in valuing and recognising donated time and services within NFP financial statements as non-exchange revenue.

The section focuses on:

  • When is the recognition of volunteer time required?

  • What measurement basis is used?

  • What narrative disclosures are required?


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Australia

When is the recognition of volunteer time required?

Recognition is optional where the fair value of the service supplied by a volunteer can be measured reliably.


What measurement basis is used?

Fair value.


What narrative disclosures are required?

Entities are recommended to disclosure narrative information their entity’s dependence arising from volunteer services they receive, including those not recognised.


ACCOUNTING ENTRIES

DR Expense

CR Income


RELEVANT SECTION OF ACCOUNTING STANDARDS/GUIDANCE

AASB 1058 Income of Not-for-Profit Entities, Paragraphs 18-22, 26-27, B1, B7-B9 and B32


ILLUSTRATIVE EXAMPLE

AASB 1058 Income of Not-for-Profit Entities, IE7 (Example 12)

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Canada

Private Sector NFPOs

When is the recognition of volunteer time required?

Recognition is optional where the fair value of the services supplied by a volunteer can be reasonably estimated and the services are used in the normal course of the entity’s operations and would have otherwise been purchased. However, common practice is to not recognise volunteer services.


What measurement basis is used?

Fair value.

Where the services are being utilised to construct or develop an asset, the amount recognised is included in the cost of the asset being constructed.


What narrative disclosures are required?

Entities are required to disclose the nature and amount of those services recognised.


ACCOUNTING ENTRIES

DR Expense

CR Income


Where the service is being utilised to develop or construct an asset:

DR Fixed Asset (Cost)

CR Income


RELEVANT SECTION OF ACCOUNTING STANDARDS/GUIDANCE

CPA Canada Handbook – Accounting (Part III), Section 4410 contributions — revenue recognition, Paragraphs 16-18, 20 and 24


ILLUSTRATIVE EXAMPLE

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Colombia

When is the recognition of volunteer time required?

Recognition is required where the services supplied by volunteers are either: being utilised to create or enhance a non-financial asset; or require specialised skills, are provided by individuals possessing those skills and would have otherwise been purchased.


What measurement basis is used?

Fair value.

Where the services are being utilised to create or enhance a non-financial asset, the amount recognised can be the fair value of the asset or of the asset enhancement resulting from the service.


What narrative disclosures are required?

Entities are advised to describe the programs or activities for which those services were used, including the nature and extent of the contributed services received for the period and the amount recognised as revenue for the period.

Entities are recommended to disclose all services supplied by volunteers, including those not recognised in the financial statements if practicable.

The enforceable disclosures are those included in the IFRS or  IFRS for SME, depending on the classification of the entity.


ACCOUNTING ENTRIES

DR Expense

CR Income


RELEVANT SECTION OF ACCOUNTING STANDARDS/GUIDANCE

Financial Accounting Standards Board, Statement of Financial Accounting Standards No. 116, Accounting for Contributions Received and Contributions Made, Paragraph 9, 10 and 19

General recognition conditions and disclosure requirements of IFRS or IFRS for SMEs


ILLUSTRATIVE EXAMPLE

Financial Accounting Standards Board, Statement of Financial Accounting Standards No. 116, Accounting for Contributions Received and Contributions Made, Paragraphs 195-206 (Examples 11-15)

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New Zealand

Tier 1 and Tier 2 PBE Standards

When is the recognition of volunteer time required?

Recognition is optional where the fair value of the services supplied by a volunteer can be measured reliably and the entity has control over the services.


What measurement basis is used?

Fair value.

Where the services are being utilised to construct an asset, the amount recognised is included in the cost of the asset being constructed.


What narrative disclosures are required?

Entities are recommended to disclose the nature and type of major classes of services in-kind received, including those not recognised.


ACCOUNTING ENTRIES

DR Expense

CR Income


Where the service is being utilised to develop or construct an asset:

DR Fixed Asset (Cost)

CR Income


RELEVANT SECTION OF ACCOUNTING STANDARDS/GUIDANCE

PBE IPSAS 23 Revenue from Non-Exchange Transactions, Paragraphs 98-103 and B21


ILLUSTRATIVE EXAMPLE

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Tier 3 Simple Format Reporting Standard – Accrual (NFP)

When is the recognition of volunteer time required?

Recognition is optional where the fair value of the services supplied by a volunteer can be measured reliably and the entity has control over the services.


What measurement basis is used?

Fair value.


What narrative disclosures are required?

Entities are required to disclose information about significant services received in kind in the notes to the performance report.


ACCOUNTING ENTRIES

DR Expense

CR Income


Where the service is being utilised to develop or construct an asset:

DR Fixed Asset (Cost)

CR Income


RELEVANT SECTION OF ACCOUNTING STANDARDS/GUIDANCE

Public Benefit Entity Simple Format Reporting – Accrual (Not-for-profit), Paragraphs A37(f), A43(a)(iv), A68 and A189


ILLUSTRATIVE EXAMPLE

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United Kingdom

When is the recognition of volunteer time required?

Recognition is required if services are supplied by a volunteer as part of their trade or profession.

The contribution of general volunteers is prohibited.


What measurement basis is used?

The value to the entity - the amount that the entity would pay in the open market for an alternative item that would provide a benefit to the entity equivalent to the donated item. Value to the entity may be lower than, but cannot exceed, the price the entity would pay in the open market for the item.


What narrative disclosures are required?

Entities must include a narrative description of the role played by general volunteers and provide an indication of the nature of their contribution in a note to the accounts.


ACCOUNTING ENTRIES

DR Expense

CR Income


RELEVANT SECTION OF ACCOUNTING STANDARDS/GUIDANCE

FRS 102, Paragraphs PBE34.64-PBE34.74 and Appendix B to Section 34 (specifically paragraphs PBE34B.8-PBE34B.12)

Charities SORP (FRS 102), Paragraphs 6.13-6.19


ILLUSTRATIVE EXAMPLE

Model Trustees’ Annual Report and Accounts: Arts Theatre Trust (FRS 102 version), Page 22, Note 4

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USA

When is the recognition of volunteer time required?

Recognition is required where the services supplied by volunteers are either: being utilised to create or enhance a non-financial asset; or require specialised skills, are provided by individuals possessing those skills and would have otherwise been purchased.


What measurement basis is used?

Fair value.

Where the services are being utilised to create or enhance a non-financial asset, the amount recognised can be the fair value of the asset or of the asset enhancement resulting from the service.


What narrative disclosures are required?

Entities must disclose all services supplied by volunteers, including those not recognised in the financial statements.

Entities must describe the programs or activities for which those services were used, including the nature and extent of the contributed services received for the period and the amount recognised as revenue for the period.

Entities are recommended to disclose the fair value of the contributed services, and give suggestions of the ‘nature and extent’ of the contributed services.


ACCOUNTING ENTRIES

DR Expense

CR Income


Where the service is being utilised to create or enhance a non-financial asset:

DR Fixed asset (Cost)
CR Income


RELEVANT SECTION OF ACCOUNTING STANDARDS/GUIDANCE

FASB Accounting Standards Codification, ASC 958-605-25-16, ASC 958-605-30-1 and ASC 958-605-50-1


ILLUSTRATIVE EXAMPLE

FASB Accounting Standards Codification, ASC 958-605-55 (Examples 7-11, Paragraphs 52-68)

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