For recording a donated asset, the acquisition value is based on fair value at donation date.

• A. Acquisition value equals the fair value at the date of donation
• B. Acquisition value equals the original cost to the donor
• C. Acquisition value equals depreciated value
• D. Acquisition value equals the fair value at the date of donation

Answer: (D)

When a government receives a donated asset, you record it at its fair value on the date of donation. That fair value becomes the acquisition value and is used to recognize the asset and the donation in the financial statements. The donor’s original cost isn’t used for the recipient’s books, and depreciation is accounted for only after the asset is recorded (depreciation typically starts over the asset’s useful life, with land usually not depreciated). So, the acquisition value reflects the asset’s fair value at the donation date, which is why that approach is correct. For example, if equipment is donated with a fair value of $200,000, you debit the equipment asset for $200,000 and credit contributions/revenue for $200,000, then begin depreciation over the asset’s useful life.