This session is intended to help those who have recently sold to an ESOP and need a better understanding of the initial and recurring impact on the financial statements under Generally Accepted Accounting Principles. Users of the financial statements, including lenders, typically require the financial statements post-ESOP to be recorded in accordance with GAAP. We will cover the most common entries associated with a transaction and discuss initial and recurring entries associated with the ESOP shares released and synthetic equity. We will also discuss the ordering and reasoning behind when the recurring entries are booked. Additionally, we will illustrate the effects of the transaction and ongoing entries on the footnotes of the financial statements. Finally, we will discuss a banker’s perspective on post-ESOP transaction financial statements, common covenants calculations, and common non-GAAP accounting they see. NCEO Resource: Accounting for Leveraged ESOP Transactions
Learning Objectives:
Gain an understanding of the GAAP entries needed to book an initial ESOP transaction and the impact to common bank covenants
Gain an understanding of the annual entries associated with ESOP shares and synthetic equity and their impact to common bank covenants
Gain an understanding of the types of footnote disclosures related to an ESOP
