News & Insights
2024 School Update: GASB 101
March 14th, 2024
|
Audit
GASB Statement No. 101, Compensated Absences requires that liabilities for compensated absences be recognized for (1) leave that has not been used and (2) leave that has been used but not yet paid in cash or settled through noncash means.
A liability should be recognized for leave that has not been used if (a) the leave is attributable to services already rendered, (b) the leave accumulates, and (c) the leave is more likely than not to be used for time off or otherwise paid in cash or settled through noncash means. This Statement also establishes guidance for measuring a liability for leave that has not been used, generally using an employee’s pay rate as of the date of the financial statements.
A key distinction from previous guidance is the shift from a rules-based approach to a conceptual framework approach, particularly evident in the treatment of sick leave accounting under GASB 101, which aligns sick leave calculations with other compensated absences rather than providing separate options for accounting, as seen in GASB 16.
The following example compares the accounting for sick time under GASB 16 compared to GASB 101:
| Example |
Sick leave is paid out 50% after 5 years of service:
Sick leave is attributable to services already rendered and accumulates. |
| GASB 16 | GASB 101 | |
| Liability Calculation | The vested portion would be recorded at 50% ($600,000).
For employees with less than five years of service, based on historical trends, it’s probable that 25% of employees will stay on for more than five years and receive the termination payment at 50% ($1,400,000 x 25% x 50% = $175,000).
|
Vested portion:
Unvested portion: For employees less than five years of service:
|
| Liability Amount | $775,000 | $1,490,000 |