You need to enable squashfs in your kernel configuration.
I took a look at meta-fsl-arm (which has been abandoned ~2 years ago and is part of meta-freescale now), the linux-imx kernel defconfig does not enable the squashfs module. You will need to update the kernel configuration yourself. I do not recall linux-imx packages using configuration fragments like linux-yocto does, so you will have to add a linux-imx_%.bbappend file and update the configration there.
The meta-snappy layer contains a defconfig for linux-yocto right here https://github.com/morphis/meta-snappy/blob/master/recipes-kernel/linux/files/snappy.cfg you can use it as reference to figure out what needs to be enabled in your kernel. Not everything listed there is needed. I’d say the most important settings are: CONFIG_SQUASHFS (with CONFIG_SQUASHFS_XZ), CONFIG_*_NS, CONFIG_CGROUPS and CONFIG_SECCOMP. There is some additional information about kernel requirements and configuration of sample kernels right here https://github.com/snapcore/sample-kernels/tree/master.