FASB Delays Implementation Date for FAS 150 for Closely Held Companies

The Financial Accounting Standards Board (FASB) has delayed the date after which closely-held companies must implement new rules for showing a cost for mandatorily redeemable obligations, including equity instruments. As we have discussed in prior issues, it appears that these rules could affect ESOPs where stock from the plan is distributed to employees, who then have a put option for the shares to the company. Originally, the rules were to take effect for fiscal years after December 15, 2003; now that has been put back one year. Many companies (ESOP and otherwise) complained that the new rules could put them into technical bankruptcy or fraudulent conveyance situations. FASB did not indicate, however, that it would consider changing the rules.