This deceptively simple question raises a large number of legal and accounting issues.  It involves different types of in-kind gifts, differences between tax accounting and financial accounting, and the opportunity to use your numbers on grant applications without regard to the formal rules.

On your tax return, you should record contributions of “stuff,” tables and chairs, art, computers, etc., at the fair market value of the items you receive.  Donors who give you stuff worth more than $500 will have to make an estimate of the value and obtain an independent appraisal for claims of more than $5000.  (See Ready Reference Page:  "IRS Requires Substantiation of Contributions")  You should ask them about the values and exercise your independent judgment if they seem far off the mark.  You cannot include the value of volunteer services or the use of facilities (or musical instruments) on your tax return and the loans are not deductible to the donor.

Generally you should follow the same rules with regard to “stuff” for your financial statements, but the FASB rules allow you to value certain contributed services if they are provided by persons with specialized skills necessary for your program or enhance the non-financial assets of the organization.  In most cases you will have to record an equal expense in order to balance the financial accounting.  Work with your accountant to determine what should be recorded in this area.

But even if you don’t or can’t include donated services or use of facilities on your financial statements, there is no legal rule that says you can’t list their value on a grant application if it helps show the scope and the value of the work your organization does.  If you make clear the source and type of your in-kind donations, the grantmaker can decide how it wants to count them.