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How do you value gifts-in-kind in your accounting records?

by , 07 June 2013
In South Africa it's estimated that income generated through donations is in excess of R11 billion per annum. But many entities don't know how to treat this income in their accounting records.

Robin, a member of the Accounting and Tax Club , asked a question about gifts-in-kind and the impact they have on his books.

Let's see what he asked, and what Alan Lewis, Tax Advocate and independent tax consultant, advised Robin about valuing this correctly.

+++ How can you be sure, with changing laws and regulations, that you…+++
  • Interpret regulations correctly?
  • Record company finances correctly?
  • Avoid penalties and fines ...
 And can you prove it to SARS or your auditors?

I have the solution.


What are the requirements for valuing gifts-in-kind in your accounting records?

What kinds of valuation must be performed to validate the amounts raised? E.g. if an NGO receives free airtime on a TV station for advertising, or a printing company does the printing of a NGO's annual report (this includes cost of paper, time, machinery overheads)?

Do we just take the word of the supplier about the cost of these gifts-in-kind, and record them like this in the accounting records? We've found it difficult to get quotes for similar products.

But what are gifts-in-kind?

Gifts-in-kind are contributions of goods or services, other than cash grants.

Corporations often give gifts-in-kind to non-profit organisations.

They'll offer them along with or instead of cash grants.
But how do you treat these in your accounting records? Let's see what the expert had to say…

+++ SARS has confirmed that it'll be compulsory for all companies to complete their IT14SD forms very soon +++

So why not get your copy of How to successfully complete you IT14SD form now and start preparing in advance so you're not caught off guard.+++

The one golden rule for gifts-in-kind
The general rule is to value the item you receive according to what you could get in the open market, if you'd be able to sell it under some reasonable method of sale.
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