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Monday, May 6, 2013
by Rebecca J. Miller
Because the financial statement
of an employee benefit plan that covers 100 or more participants is subject to
audit under the Employee Retirement Income Security Act, and those
audited financial statements are uploaded to the Department of Labor’s (DoL)
EFAST2 database, this
disclosure requirement has caused some consternation. It means that competitors
of a private company, potential acquirers for a company, attorneys looking for
potential litigation on the share price, or other potentially adverse parties
have unrestricted access to this potentially confidential information.
This confidentiality issue has
prompted FASB to propose an indefinite deferral of the effective date of the
quantitative disclosure described above for employer securities. The indefinite
deferral recognizes that FASB is able to move on this quickly and is
intended to allow time for discussions between the employee benefit plan
community and DOL to resolve this issue. Those parties charged with
preparing the financial statements and footnotes for the ESOP must still
consider the required elements of the disclosures – valuation methodologies,
unobservable inputs and the description of the process used by the ESOP
fiduciary in arriving at fair value. The
only required item that is proposed to be omitted is the quantification of the
The proposed deferral would be
effective upon issuance of the final ASU, which is expected in June. This
means that companies that are concerned with this disclosure should not file
their Form 5500 until after the ASU is finalized.
The FASB’s proposed ASU, Fair Value
Measurement (Topic 820): Deferral of the Effective Date of Certain Disclosures
for Nonpublic Employee Benefit Plans in Update No. 2011-04, is available
for comment until May 31. To
review comment letters filed to date, see: Private Company Securities Comment Letters. To facilitate
the comment process, FASB has created an Electronic Feedback Form that includes specific questions regarding the
proposed changes. If you wish to submit
individually crafted comments, such comments may be emailed to: email@example.com. The subject line on the email should include
“File Reference No. 2013-260.” Alternatively, written comments may be delivered
Technical Director, File Reference No. 2013-260
401 Merritt 7
PO Box 5116
Norwalk, CT 06856-5116
to post a comment.
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