An employer sponsoring an ESOP under generally accepted accounting principles ASC 718-40 Employee Stock Ownership Plans (formerly SOP 93-6, Employers’ Accounting for Employee Stock Ownership Plans) should disclose the following information about the plan, if applicable.
- A description of the plan, the basis for determining contributions, including employee groups covered, and the nature and effect of significant matters affecting comparability of information for all periods presented. For leveraged ESOP’s, the description should include the basis for releasing shares and how dividends on allocated and unallocated shares are used.
- A description of the accounting policies followed for ESOP transactions, including the measuring compensation, the classification of dividends on ESOP shares, and the treatment of ESOP shares for EPS computations.
- The amount of compensation cost recognized during the period.
- The number of allocated shares, committed to be released shares, and suspense shares held by the ESOP at the balance sheet date.
- The fair value of unallocated ESOP shares at the balance sheet date for shares accounted for under ASC 718-40.
- The existence and nature of any repurchase obligation, including disclosure of the fair value of the shares allocated as of the balance sheet date, which are subject to a repurchase obligation.
Since plan sponsors are ultimately responsible for their entity’s financial statements, such Plan sponsors having an ESOP are well served to incorporate all these required disclosures in their financial statements.
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For more information on this topic, please contact a member of Withum’s Employee Benefit Plan Services Team.
