As we are going to press, the FASB is meeting to discuss whether to formally add to its agenda the issue of new disclosures with respect to the fair value determination for nontraded securities. This issue created an uproar in the ESOP community, which feels these disclosures would be harmful for ESOP companies, so an exemption is being sought (see the March 13 BVWire).
The disclosure requirement is contained in Accounting Standards Update Fair Value Measurement (Topic 820, formerly FAS 157), which became effective for nonpublic entities beginning in December 2011 and thus will impact ESOPs (those with December 2012 year-end plans) in the coming year.
In February, major players in the ESOP community—the National Center for Employee Ownership (NCEO), the ESOP Association, and the Employee-Owned S Corporations of America (ESCA)—submitted a letter to the FASB’s technical director voicing concern over the ASU requirements and their consequences on employee-owned companies. In response, FASB first planned to discuss the matter at its March 28 board meeting but rescheduled the discussion to the April 10 meeting.
Greg Klein, ESCA board chairman, told BVWire: “We are encouraged by FASB’s quick attention and dedication of resources to consider our concerns.”
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