On April 30, 2013, the Financial Accounting Standards Board (FASB) issued a proposal that would indefinitely defer for nonpublic employee benefit plans certain quantitative fair value disclosures for investments in their plan sponsors' nonpublic entity equity securities.
The FASB’s exposure draft proposes to amend the transition guidance in ASC 820, Fair Value Measurement, to indefinitely defer for nonpublic employee benefit plans the requirement to provide quantitative disclosure of the significant unobservable inputs used in fair value measurements1. The proposed deferral would apply only to investments held by a nonpublic employee benefit plan in its plan sponsor's nonpublic entity equity securities, and it applies regardless of what other nonpublic entity equity securities are held by the plan.
The indefinite deferral is intended to allow time for discussions among the employee benefit plan regulators and stakeholders about the proprietary nature of the information in the fair value disclosures. The disclosures subject to the proposed deferral are required for each class of assets and liabilities. However, the FASB was concerned that if the plan sponsor's own equity securities are the only asset within an asset class, the information cannot be aggregated with other assets for disclosure purposes. This inability to aggregate could result in the distribution of the nonpublic entity's proprietary information when the benefit plan's financial statements are posted to a regulator's website.
The exposure draft also proposes to add a new defined term for a “nonpublic employee benefit plan.” It is defined as an employee benefit plan other than those that are subject to the Securities and Exchange Commission's Form 11-K filing requirements.
The deferral applies only to nonpublic employee benefit plans reporting under U.S. GAAP. There is no corresponding deferral for entities reporting under IFRS.
The proposed amendments would apply to any nonpublic employee benefit plan that holds investments in its plan sponsor's own nonpublic entity equity securities, and is within the scope of the disclosure requirements contained in ASC 820.
The proposed deferral would be effective upon issuance of the final standard, which is expected to be June 2013.
Comments on the proposal are due May 31, 2013.
PwC clients who have questions about this In brief should contact their engagement partner. Engagement teams that have questions should contact the Financial Instruments team in the National Professional Services Group (1-973-236-7803).
1Required by ASC 820-10-50-2.