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A new Governmental Accounting Standards Board (GASB) exposure draft explains requirements for recognizing and measuring compensation-related liabilities. When finalized, the new standard will replace guidance in GASB Statement No. 16, Accounting for Compensated Absences.

Compensated absences are leave that employees use for time off with pay. Leave for which employees receive payment upon termination of employment and leave for which employees receive settlement through other means, such as conversion to postemployment benefits, also are covered under the proposal. Examples include vacation and sick leave, paid time off, holidays, parental leave, bereavement leave, and certain types of sabbatical leave.

The proposed guidance would require that a liability for compensated absences be recognized if all of the following are present:

  1. The absence accumulates
  2. The absence is attributable to services rendered
  3. The absence is more likely than not to either be paid (including being paid for use) or settled through other means

Disclosures related to compensated absences also would be modified. Governments would only need to disclose the net change in liability rather than the current requirement to disclose gross increases and decreases in the compensated absences liability.  

The proposed standard would be effective in FY24 for most public institutions and new requirements would be prospectively applied. Comments are due June 4.

Contact

Sue Menditto

Senior Director, Accounting Policy

202.861.2542


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