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Financial Reporting and Regulatory Update

First Quarter 2021

From the GASB

Proposals

Compensated absences

On March 3, 2021, the GASB issued an exposure draft, “Compensated Absences,” designed to enhance the recognition and measurement guidance for compensated absences and refine related disclosure requirements.

The exposure draft proposes to supersede Statement 16, “Accounting for Compensated Absences,” and align recognition and measurement guidance for all types of compensated absences under a unified model. This proposed statement would require that a liability for compensated absences be recognized if all of these occur:

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

The general approach for measurement would be accumulated leave multiplied by an employee’s pay rate as of the financial reporting date. The proposal also would amend certain disclosures that are presently required.

The GASB believes the proposed unified recognition and measurement model would result in a compensated absences liability that more appropriately reflects when a government incurs an obligation for compensated absences. In addition, the proposed model could be applied consistently to any type of compensated absence and would eliminate potential comparability issues between governments that offer different types of leave.

Comments are due to the GASB by June 4, 2021.