New FASB exposure draft on ESOP fair value disclosures

BVWireIssue #128-2
May 8, 2013

FASB has issued an exposure draft that gives 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 concern here from stakeholders is that proprietary information would be divulged through the disclosing of all information on the valuation of private company securities held by employee benefit plans. The disclosures are made public by the Department of Labor on Form 5500, which posts the information online.

FASB has acted quickly here because of the looming deadline for the Form 5500, which is due July 31 (October 15 with an extension). Comments on the new exposure draft are due May 31 on FASB’s website.

Keep in mind: Although the exposure draft eliminates the most troubling part of the new rules, the requirements left intact will require disclosure of the qualitative information—the valuation method and key inputs. These disclosures will need to be done with care and in close collaboration between valuation experts and ESOP fiduciaries.

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