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In May 2015, the FASB issued Accounting Standards Update No. 2015-07 (“ASU 2015-07”), Disclosures for Investments in Certain Entities that Calculated Net Asset Value per Share (or Its Equivalent).

Recent Accounting Pronouncements – Applicable for Employee Benefit Plans

Top Employee Benefit Plan Tips for August

In May 2015, the FASB issued Accounting Standards Update No. 2015-07 (“ASU 2015-07”), Disclosures for Investments in Certain Entities that Calculated Net Asset Value per Share (or Its Equivalent). This ASU amends FASB’s Accounting Standards Codification 820 (“ASC 820”), Fair Value Measurements and Disclosures. 

Plan sponsors should consider the effect of the amendment on their employee benefit plan financial statement disclosures. 

The amendment removes the requirement to categorize within the fair value hierarchy (i.e., Level 1, 2 or 3) all investments for which fair value is measured using the net asset value per share practical expedient. The amendment applies to all periods presented. However, disclosures regarding the nature and risk of investments as well as the probability of the investment being sold at amounts different than net asset value are still required. In addition, a reconciliation is needed from the fair value of assets categorized within the fair value hierarchy to the amounts presented in the statements of net assets available for benefits.

For public business entities (i.e., 11-K filers), ASU 2015-07 is effective for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years.  For all other entities (i.e., employee benefit plans, excluding 11K filers), this amendment is effective fiscal years beginning after December 15, 2016 and interim periods within those fiscal years.  Early adoption is permitted. 

Recap of Top Employee Benefit Plan Tips for August:

  • Read ASU 2015-07, Disclosures for Investments in Certain Entities that Calculated Net Asset Value per Share (or Its Equivalent).
  • Determine if the employee benefit plan has investments measured using the net asset value per share practical expedient.
  • Consider adopting the amendment early.
  • Update financial statement disclosures.
    • Remove leveling of investments measured using the net asset value per share practical expedient.
    • Add a reconciliation from the fair value hierarchy table to the statements of net assets available for benefits.
     

Denise Finney is a Director in the Pension Services Group dedicated to employee benefit plan audits. With 15 years of public accounting experience, she specializes in assisting clients with annual audit requirements regarding employee benefit plans.

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