Statement No. 101 also establishes guidance for measuring a liability, which generally requires accumulated leave to be multiplied by an employee’s pay rate as of the financial reporting date. Certain salary-related payments that are both directly and incrementally associated with payments for compensated absences (such as the employer portion of social security taxes or Medicare taxes) also should be included in the measurement of a liability.
Statement No. 101 requires that accumulated leave that is more likely than not to be settled through conversion to defined benefit postemployment benefits not be included in the compensated absences liability. However, accumulated leave that is more likely than not to be paid to an employee through a distribution to an individual account to be used for specified purposes (such as payment of the employee’s share of future healthcare premiums) should be included in the compensated absences liability following the general measurement provisions of Statement No. 101.
With respect to financial statements prepared using the current financial resources measurement focus, Statement No. 101 requires that a governmental fund liability and expenditure be recognized as payments for compensated absences come due each period.
Statement No. 101 provides an exception to the existing requirement to disclose the gross increases and decreases in a compensated absences liability such that governments are allowed to disclose only the net change in the liability. In addition, governments are no longer required to disclose which governmental funds typically have been used to liquidate the compensated absences liability.
The requirements of Statement No. 101 are effective for fiscal years beginning after December 15, 2023, and all reporting periods thereafter. Earlier application is encouraged.
The full text of Statement No. 101 can be found here.
Readers should not act upon information presented without individual professional consultation.