The Financial Accounting Standards Board has voted to give ESOP companies an indefinite deferral on the requirement to disclose quantitative information on how they value nontraded securities, including securities of the sponsoring company. The indefinite deferral applies to significant unobservable inputs used in Level 3 fair value measurement but does not apply to plans that are subject to SEC filing requirements. The concern here was that proprietary information would be divulged through disclosures that are made public by the Department of Labor on Form 5500, which posts the information online. BVWire applauds the FASB for acting quickly on this matter because the deadline for the Form 5500 is July 31 (October 15 with an extension).
FASB will soon release an Accounting Standards Update, Fair Value Measurement (Topic 820): Deferral of the Effective Date of Certain Disclosures for Nonpublic Employee Benefit Plans in Update No. 2011-04, that will include the latest change. Effective date: Upon release for all financial statements that have not yet been issued.
Caution. Plans will still have to disclose qualitative information, meaning the valuation method and key inputs. It could be argued that proprietary information could be gleaned from this information using public data. Therefore, the disclosures need to be done with care and in close collaboration.
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