Contributed services are professional services that have been donated by someone outside of your organization with specialized skills – such as those provided by doctors, nurses, lawyers or accountants. A rule of thumb I like to apply is that if the person has letters after their name (CPA, JD, etc.) or requires some kind of licensing to do their job (architect, etc.) they can probably provide you contributed services that you (and they) can recognize.
The service must create or enhance a non-financial asset. For example, the organization acquires a graphic designer to create collateral materials to describe fund-raising and development programs. Although the services are provided on a pro bono basis, certain technical expertise is necessary to produce the materials, which would otherwise have been purchased.
Or
The service must require specialized skills. General volunteer services, such as working a booth at a fundraising event, are typically not recognized as contributed services and must be provided by persons possessing those specialized skills, and
Is of the type that typically would be purchased by the nonprofit organization if the service or skills were not donated.
An example of a recognized service would be a lawyer providing necessary legal advice.
What would not be recognized is:
A non-lawyer providing legal advice.
A lawyer providing un-asked for legal advice.
That same lawyer stuffing envelopes for a fundraiser.
Assuming the criteria above have been met, the nonprofit would record contribution revenue for the fair market value (based and invoice from the service provider) of the donated services and also as an expense in the appropriate category.
FASB 116 has the details on the rules for contributed services, click here for a post about both 116 and 117.