Understanding the New Standard | GASB 101
Published on by Daniel Damonte in Assurance
The Governmental Accounting Standards Board (GASB) issued Statement No. 101, Compensated Absences (GASB 101) in June 2022. The statement is effective for periods beginning after December 15, 2023.
This Statement will supersede Statement No. 16, Compensated Absences. GASB 101 will provide comparability and uniformity to recognizing liabilities for leave provided by governmental entities. Here’s what you need to know, and how it might impact your organization.
What are compensated absences?
Compensated absences are time for leave for which employees may receive one or more of the following:
- Cash payments when the leave is used for time off
- Other cash payments, such as payment for unused leave upon termination of employment
- Noncash settlements, such as conversion to defined benefit post-employment benefits
Examples include paid time off (PTO), vacation or annual leave, sick leave, holidays, parental leave, bereavement leave, and certain types of sabbatical leave.
When should there be an accrual for compensated absences?
Under the new standard, liabilities are recognized based on leave that has not been used, and leave that has been used but not yet paid or settled.
Leave that has not been used is:
- Services are already rendered
- The leave balance accumulates
- The leave is more likely than not to be used for time off or otherwise paid in cash or settled through non-cash means.
The term ‘more likely than not’ means greater than 50% probability. Governments and governmental entities should review employment policies related to compensated absences to determine if leave meets the requirements listed above. Historical use, payment, and forfeiture of compensated absences should also be considered to determine if an accrual is necessary.
GASB 101 also provides the option to disclose total increases and decreases to the accrual for compensated absences or to disclose the net change in the accrual balance, as long as the change is noted as a net change.
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If you have questions about how the new statement impacts your organization or would like to set up a free consultation with one of our assurance professionals, contact us. As always, we’re here to help.
