GASB issues guidance on accounting for compensated absences


The Governmental Accounting Standards Board introduced new assistance Wednesday to deliver a unified accounting remedy for compensated absences of condition and regional governing administration staff and simplify the disclosure function.

The guidance in Statement No. 101, Compensated Absences, supersedes the previously assistance from 1992 in Assertion No. 16, Accounting for Compensated Absences, and comes in response to GASB’s endeavours to periodically re-analyze its older benchmarks to make absolutely sure they remain effective. their ongoing efficiency. The new steerage aims to enhance the recognition and measurement needs for compensated absences and refines the associated disclosure requirements.

Condition and community governments frequently give paid out leave added benefits to their staff in the variety of holiday vacation go away and ill go away. But some of these benefits have improved a lot considering the fact that 1992, such as the use of a paid out-time-off model that has features of each holiday and ill leave. Statement 101 aligns recognition and measurement direction for all kinds of compensated absences underneath a unified design.

GASB’s hope is the new design will empower governments to acknowledge a legal responsibility that much more correctly displays when they incur an obligation for compensated absences. The product also should develop additional regularity in application and larger comparability throughout governments.

GASB logo at headquarters in Norwalk, Connecticut
GASB headquarters in Norwalk, Connecticut

Courtesy of GASB

Statement 101 describes the situation beneath which governments will have to have to identify a liability for compensated absences and presents advice for measuring that legal responsibility. The general approach for measurement is to use an employee’s pay back charge as of the money reporting date.

Frequently, a legal responsibility for leave that has not been used would be acknowledged if the leave:

  • (a) Is attributable to products and services now rendered
  • (b) Accumulates and,
  • (c) Is more likely than not to be employed for time off or or else paid or settled.

There are some exceptions, nevertheless, such as with parental go away and armed forces go away, for which a legal responsibility wouldn’t be regarded right up until the depart begins.
The direction gets rid of some of the existing disclosure necessities that GASB research discovered didn’t give essential info to users of financial statements, or at minimum will make them optional. The common features an substitute to the existing requirement to disclose the gross annual raises and decreases in very long-term liability for compensated absences, permitting governments to disclose only the net once-a-year adjust in the liability as extensive as it is identified that way. Statement 101 also gets rid of a disclosure prerequisite for authorities money used to liquidate the legal responsibility for compensated absences.

“We undertook the undertaking to try out to modernize that literature simply because GASB 16, which is the latest direction for compensated absences, arrived out a very long time in the past, and those kinds of rewards have progressed,” GASB chairman Joel Black instructed Accounting Nowadays in an interview in Might (see tale). “When we issued that, the guidance talks about a distinction between family vacation leave and ill go away. Now a great deal of businesses and governments have PTO, which is a mix of people. So how does PTO time perform in a similar way, accounting clever, to a govt that may nevertheless have trip and ill [days], as opposed to a authorities that just has PTO that brings together them? We desired to relook at that literature and try out to modernize it, and make guaranteed that for all the present techniques in which these rewards are offered, the accounting allows for that and can outcome in regular guidance.”

The demands of Assertion 101 get effect for fiscal many years starting off soon after Dec. 15, 2023, and all reporting durations soon after that, but GASB is encouraging state and neighborhood governments to implement the steering sooner.



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