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Generally Accepted Accounting Principles |
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Accounting for Compensated Absences
 U.S. GAAP by Topic |
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Statements of Financial
Accounting Standards (SFAS) |
| Accounting for Compensated Absences |
| Statement
of Financial
Accounting Standards No.
43 "Accounting for Compensated Absences" Issued in November 1980 What are
Compensated Absences?Compensated absences mean --> employee absences for which employees will be paid Examples of compensated absences --> vacation, illness, holidays When is an expense
recognized for such payments?Expenses are recognized --> in the period when employees provide services to be qualified for compensated absences. If employees did not use all of such compensated absences --> a liability is accrued for unused portion. Liability is accrued when all of the following conditions are met: a. Services already rendered (by employees) b. Rights that vest or accumulate c. Payment is probable d. Amount can be reasonably estimated. Vested rights --> not contingent on an employee's future service --> should be paid when an employee leaves Accumulate --> unused (but earned) rights to be carried forward to future periods |
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