Which of the following is true about contributed securities donated to not-for-profit organizations?

• A. They are recorded at cost.
• B. They are recorded at fair value at the date of the gift.
• C. They are recorded only if sold within one year.
• D. They are not required to be disclosed in financial statements.

Answer: (B)

When a not-for-profit receives a donated security, its value is recognized at fair value on the date of the gift and recorded as a noncash asset with corresponding contributions revenue (and with donor-restriction classification if applicable). This reflects the economic benefit the organization now controls, independent of the donor’s original cost basis. The asset’s fair value is used because it represents what the organization could obtain if it were to sell the security today. If the securities are later sold, any resulting gain or loss is recognized in investment income based on the sale proceeds versus the carrying amount at the donation date, but the initial recognition always occurs at the date of the gift, not upon sale. Therefore, recognizing at fair value on the date of the gift is the correct approach. Disclosing material noncash contributions is required, so it wouldn’t be correct to say they aren’t disclosed.