GASB Statement No. 101 Compensated Absences (GASB-101) is bringing some important changes for how governments report different types of leave. The goal of the new statement is to improve financial reporting by allowing a more unified recognition and measurement model.
This is the first change to compensated absences since GASB Statement No. 16 released in 1992 GASB-101 will be effective for fiscal years beginning after December 15, 2023. June 30th governments will need to implement on July 1, 2024.
A compensated absence includes benefits for employees such as vacation leave, sick leave, paid time off, holidays, parental leave, bereavement leave, and certain types of sabbatical leave.
Sabbatical leave, where an employee is required to perform duties of a different nature for the government, rather than not performing any significant duties, is not considered a compensated absence.
Governments will need to recognize a liability for compensated absences for the following situations:
Leave that has not been used should be recognized if the following occurs:
MLTN is defined in GASB-101 as a likelihood of more than 50%. The soon-to-be former GAAP measures the liability at probable. Many practitioners judge ‘probable’ to be more than 80%, but there is no standard definition of ‘probable.’ The change to MLTN will likely result in higher liabilities for some governments as they implement GASB-101.
The following factors should be considered by the government as they evaluate whether a leave is more likely than not:
If a portion or all the leave is more likely than not to be paid at a different rate, a government should measure that portion of the liability using that different rate as of the date of the financial statements.
Some important factors to consider for how disclosures will change include:
These changes will take time to gather the information for the compensated absences liability calculation, it is important for governments to get started on this implementation now. For states and other large governments, actuaries may need to be engaged.
The implementation of GASB-101 will require preparation and planning.
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