REMINDER! GASB Statement 101 on Compensated Absences Effective After December 15, 2023

REMINDER! GASB Statement 101 on Compensated Absences Effective After December 15, 2023

Last updated on December 22nd, 2023

It has been almost a year and a half since GASB 101 on compensated absences was issued to  standardize how compensated absences are recognized, measured and disclosed. It takes effect for fiscal years beginning after December 15, 2023, although earlier application was encouraged. As a result of the Statement, governments will provide more consistent and comparable information about compensated absences. Here are the highlights….

Who does this impact?

All units of state and local government.

What is required?

A compensated absence liability is recognized for an unused leave attributable to services rendered if it accumulates; carries forward to a future reporting period; and is more likely than not to be used for time-off or paid for via cash or other means based on relevant factors like policies and historical information.

A liability is also recognized for a used leave that has not been paid for in cash or other means; in this case, the liability equals the amount of the cash or noncash settlement.

Measurement is based on an employee’s pay rate in effect on the financial reporting date, unless a compensated absence arrangement calls for a different rate at the time of payment (i.e., sick pay based on 50% of the employee’s pay rate). Salary-related payments – including the employer’s share of payroll related taxes, defined pension contributions and other post-employment benefit plans – are to be included as part of the compensated absence liability calculation.

Certain compensated absences like parental, military, and jury duty leave should be recognized as a liability when the leave starts. For other types, like paid time off, liability is recognized when the leave is used.

Also, certain financial disclosure requirements are changing. The funds that governments use to liquidate the liability for compensated absences do not have to be disclosed. Governments will now be allowed to disclose only the net change in the liability instead of the gross increases and decreases (as long as they identify it as a net change). Plus, financial statements must note consideration of Statement 101 and the adoption date.

When does it take effect?

Fiscal years beginning after December 15, 2023. So, if your municipality’s fiscal year ends this December 31, Statement 101 begins to apply starting January 1, 2024.

Why was the statement issued?

Per, Statement 101 was issued “to better meet the information needs of financial statement users by updating the recognition and measurement guidance for compensated absences. That objective is achieved by aligning the recognition and measurement guidance under a unified model and by amending certain previously required disclosures.”

How to promote compliance.

Each government entity should consider which benefits are affected; how its accounting system will gather necessary information and perform calculations; whether internal control processes need to change; how accounting entries for compensated absences will be documented; and the impact on its financial statement.

If you need advice or assistance with your GASB 101 implementation or any other accounting, tax, and audit needs, please remember RBT CPAs is here to help. Give us a call to learn what we can do for you.


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