GASB 101: Accounting for Compensated Absences in Governmental Entities

What is GASB 101? 

With everyday constraints facing government entities, paid time away from work can be an affordable benefit for governmental employers; however, these compensated absences can present some accounting challenges. GASB Statement No. 101 addresses these challenges by reestablishing accounting and financial reporting for compensated absences in governmental entities. The statement aligns recognition and measurement guidance when leave is not used or when leave is used but not paid in cash or settled through noncash means. 

The new model will improve reporting to financial statement users in the following ways: 

• More appropriately reflecting the liability when the obligation is incurred. 

• Improving the comparability between reporting by various government entities offering different types of leave. 

Key Changes Between Statement No.101 and Statement No. 16 

With new requirements and polices, navigating the changes between Statement No. 16 and Statement No. 101 may be challenging. From implementing new protocols to learning how to meet changing compliance standards, it’s vital to understand the distinct differences between the two.  

Accrued Leave: Recognition and Measurement Statement No. 101 supersedes Statement No. 16, which was issued in 1992. The original statement primarily addressed accounting and financial reporting for paid leave benefits such as vacation and sick leave. Since then, there has been an evolution in the types of leave provided to government employees, resulting in inconsistent accounting applications for the liability related to compensated absences. 

See below for a summary of key changes between Statement No. 101 and Statement No. 16: 

How GASB 101 Affects Governmental Entities 

Compared to Statement No. 16’s accounting requirements, compensated absences reported are expected to increase under Statement No. 101. The increase in the compensated absence liability will occur because of the lower threshold when considering the likelihood that employees will use leave time. Applying a threshold of “more likely than not,” the accumulated leave will be used in the form of either cash payments or time off (or over 50%), enhancing an organization’s ability to identify economic substance and governmental obligation. 

If all the following are true, under Statement No. 101, a liability should be recognized for leave that has not been used: 

• The leave is attributable to services already rendered. 

• The leave accumulates. 

• The leave is more likely than not to be used for time off or otherwise paid in cash or settled through noncash means. 

The liability should be at an employees’ pay rate at the date of the financial statements unless the leave will be paid at a different rate. Additionally, salary-related payments such as Medicare, social security tax, and certain defined contribution payments are to be included in the liability; whereas defined benefit plan contributions should not be included. 

Implementation Guidelines for GASB 101 

Effective Dates & Compliance Deadlines 

Statement No. 101 is effective for fiscal years beginning after December 15, 2023, and all reporting periods thereafter. Implementing this standard requires organizations to revisit policies, making sure to include the various types of leave and all current benefits. In conjunction, system reports may need reconfiguration and new methods of estimating future benefits may be helpful. Although GASB 101 is not one of the more difficult standards to implement, government entities should devote sufficient time and resources for accurate and complete financial reporting.  

Maintain Success with GASB 101 

Implementing GASB101 might feel like a daunting obstacle. Our governmental team can guide you through implementation of this standard, focusing on compliance and mitigating common stresses, so you can feel confident every step of the way.