FASB Defers Certain Nonpublic Plan Disclosures

At its board meeting June 12, FASB discussed a summary of the comments received about the exposure draft of a proposed Accounting Standards Update, “Fair Value Measurement (Topic 820): Deferral of the Effective Date of Certain Disclosures for Nonpublic Employee Benefit Plans.” Also discussed was the FASB staff’s analysis of the issues in light of stakeholder feedback received. Based on this feedback, FASB made the following decisions:

• The board affirmed its proposal to indefinitely defer certain disclosures for nonpublic employee benefit plans, with some modifications;
• Rather than define a new term, nonpublic employee benefit plan, the Codification will be amended to describe the deferral as applying to “any employee benefit plan other than those plans that are subject to the Securities and Exchange Commission’s filing requirements”;
• Expanding the scope of investments to also include the equity securities of nonpublic affiliated entities of the plan sponsor; and
• The deferral will be effective immediately upon issuance of the final Accounting Standards Update, for all financial statements that have not been issued.

According to the exposure draft, stakeholders had concerns that certain disclosure requirements, effective for nonpublic entities for annual periods beginning after December 15, 2011, would potentially provide proprietary information about nonpublic entities through the dissemination of their employee benefit plans’ financial statements on the regulator’s website.

The amendments mentioned in the exposure draft addressed those concerns by permitting an indefinite deferral of certain quantitative disclosure requirements for investments held by a nonpublic employee benefit plan in its plan sponsor’s own nonpublic entity equity securities. This applies to certain quantitative disclosure requirements for a nonpublic employee benefit plan that holds investments in its plan sponsor’s own nonpublic entity equity securities and are within the scope of the disclosure requirements contained in FASB Accounting Standards Update No. 2011-04, “Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs.” This follows earlier efforts by FASB that addressed the subject of fair value measurement (see “FASB Relaxes Inactive Market Rules on Mark-to-Market Valuation” and “FASB Kicks Off Fair Value Study”).

For efforts such as these, FASB was recently named by PLANSPONSOR one of the top 20 institutions that have influenced or changed the retirement industry over the last two decades (see “20 Institutional Leaders for the Past 20 Years”).