ESOP Rules for Government Contractors Finalized explains the May 2008 final ruling for Accounting for the Costs of ESOPs Sponsored by Government Contractors. The ruling provides more certainty by clearly defining the allowable cost as the contractor's contribution, including interest and dividends. This differs with the fair market value definition provided under Statement of Position 93-6, Employers' Accounting for Employee Stock Ownership Plans. The article also discusses the remaining concerns about dividends and notes that stock valuations remain subject to audit by the Defense Contract Audit Agency (DCAA):
Keep in mind that ESOP stock valuations remain subject to DCAA audit. Should the DCAA determine that ESOP shares were over valued, the DCAA could attempt to disallow a portion of an ESOP contribution.