For state and local governments with fast-approaching fiscal year-end reporting dates, PYA provides this refresher about the recently instituted GASB Statement 101, Compensated Absences, a unified model that helps governments appropriately report obligations. Most entities have used the new model only once since it became effective.
What is GASB Statement 101?
In June 2022, the Governmental Accounting Standards Board (GASB) issued Statement 101, Compensated Absences, to update the recognition and measurement guidance for compensated absences. It became effective for fiscal years beginning after December 15, 2023, and supersedes Statement 16, issued in 1992. The updated statement improves the reliability, consistency, and comparability of governmental financial reporting and brings many changes for organizations accounting for compensated absences.
How do governments implement Statement 101?
Statement 101 defines “compensated absences” as leave that has not been used and/or leave that has been used but not yet paid in cash or settled through noncash means. Governments should recognize a liability for leave that has not been used if the leave is attributable to services already rendered, the leave accumulates, and the leave is more likely than not to be used for time off or otherwise paid in cash or settled through noncash means.
Additionally, Statement 101 updates recognition criteria from the previous “probable” threshold to the “more likely than not” threshold. This shift represents a lower threshold for the probability for those recording compensation liabilities. The change could result in larger liabilities being recorded for compensated absences.
Governments should also consider the notes to the financial statements. Preparers now are required to disclose the net change for increases and decreases in compensated absences, where previously fluctuations were disclosed for gross changes.
Additionally, governments are also no longer required to disclose which governmental funds are typically used to liquidate compensated absence liabilities. More changes can be found in the GASB pronouncement for Statement 101.
PYA is committed to helping governmental entities understand reporting requirements and prepare financial reports that adhere to the most updated models. Our experienced team of tax, audit, and accounting experts helps you focus on your mission while ensuring financial transparency and sustainability, and our business advisory services help you implement new accounting standards while offering strategic support.
