GASB proposes new guidance on compensated absences

By Ken Tysiac

State and local government accounting for employees’ vacation time and other forms of paid leave would change under a proposed standard GASB issued Wednesday.

Leave benefits for many state and local governments have evolved since 1992, when GASB issued Statement No. 16, Accounting for Compensated Absences.

In reexamining the standard, GASB found that benefits have evolved as some state and local governments have moved to the use of paid time off (PTO) that may have characteristics of both vacation and sick leave.

The exposure draft, Compensated Absences, proposes superseding Statement No. 16 and aligning recognition and measurement guidance for all types of compensated absences under a unified model.

The proposal describes the circumstances under which governments would be required to recognize a liability for compensated absences and proposes guidance for measuring that liability. Generally, measurement would be accomplished by multiplying accumulated leave by an employee’s pay rate at the financial reporting date.

GASB designed the proposal to result in governments recognizing a liability that more appropriately reflects their obligations for compensated absences. GASB also believes the proposal would lead to more consistency in application and better comparability across governments.

Certain disclosures that are presently required also would be amended. For example, under the proposal governments would have an alternative to the existing requirement to disclose the gross increases and gross decreases in a compensated absences liability. Governments would have the option to disclose only the net change in the liability.

Comments are requested by June 4 and can be emailed to

Ken Tysiac ( is the JofA’s editorial director.

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