Governmental entities almost always provide benefits to their employees in the form of compensated absences—which is a catchall phrase for instances where an employee is not at work, but is still paid. Vacation pay and sick leave represent the most common and frequently used forms of compensated absences.

One of the objectives in accounting for compensated absences is the matching of compensation expense with the benefits received from an employee’s work. In other words, as an employee works and earns vacation and sick leave that will be paid or used in the future, there should be some recognition that a liability and an expense have occurred during the time that the employee is providing the services. Of course, using the basis of accounting and measurement focus of governmental funds, the liability for compensated absences is generally not recorded by the fund, but is instead only recorded in the government‐wide statement of net position. There is no corresponding expenditure in the governmental fund until these amounts are actually paid or when they are due to be paid.

The GASB made some slight modifications to the then ...

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