Statement of Financial Accounting Standards No. 43

Statement of Financial Accounting Standards No. 43 FAS43 Status Page FAS43 Summary Accounting for Compensated Absences November 1980 Financial Accounting Standards Board of the Financial Accounting Foundation 401 MERRITT 7, P.O. BOX 5116, NORWALK, CONNECTICUT 06856-5116 Copyright © 1980 by Financial Accounting Standards Board. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the Financial Accounting Standards Board. Page 2 Statement of Financial Accounting Standards No. 43 Accounting for Compensated Absences November 1980 CONTENTS Paragraph Numbers Introduction and Background Information.................................................................. 1– 5 Standards of Financial Accounting and Reporting ..................................................... 6– 9 Effective

Date and Transition................................................................................ 8– 9 Appendix A: Summary of Consideration of Comments on Exposure Draft........... 10–21 Page 3 Copyright © 1980, Financial Accounting Standards Board Not for redistribution FAS 43: Accounting for Compensated Absences FAS 43 Summary This Statement requires an employer to accrue a liability for employees' rights to receive compensation for future absences when certain conditions are met. For example, this Statement requires a liability to be accrued for vacation benefits that employees have earned but have not yet taken; however, it generally does not require a liability to be accrued for future sick pay benefits, holidays, and similar compensated absences until employees are actually absent. INTRODUCTION AND BACKGROUND INFORMATION 1. The FASB has been asked to consider practices used by employers to account for employee absences, such as vacation, illness, and holidays, for which it is expected that employees will be paid (referred to in this Statement as compensated absences). The Board has been advised that the following alternative accounting practices exist with respect to compensated absences: (a) the cost is accrued over some period before payment or (b) the cost is recognized when paid. The Board has considered those alternative accounting practices and concluded that a liability for employees' rights to receive compensation for future absences should be accrued as specified by this Statement. 2. This Statement does not apply to severance or termination pay, postretirement benefits, deferred compensation, stock or stock options issued to employees, or other long-term fringe benefits, such as group insurance or long-term disability pay. This Statement does not address the allocation of costs of compensated absences to interim periods. Furthermore, because the appropriate structure for setting accounting standards for state and local governmental units is currently under discussion, the FASB is proposing no change with respect to the nature of its involvement with pronouncements in the governmental area until that matter is resolved. Consequently, the Board has deferred a decision regarding whether this Statement should apply to state and local governmental units. 3. The Addendum to APB Opinion No. 2, Accounting for the "Investment Credit," states that "... differences may arise in the application of generally accepted accounting principles as between regulated and nonregulated businesses, because of the effect in regulated businesses of the rate-making process..." and discusses the Page 4 Copyright © 1980, Financial Accounting Standards Board Not for redistribution application of generally accepted accounting principles to regulated industries. Accordingly,...

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