GASB 101: Understanding the New Standard for Accrued Compensated Absences

/in , /by
The December 31, 2024, reporting deadline for GASB Statement No. 101 has passed, marking an important start to the new year. For government agencies preparing for audits and financial reporting in 2025, now is the perfect time to focus on ensuring compliance and building a strong foundation for success in the year ahead.

GASB Statement No. 101, issued by the Governmental Accounting Standards Board, addresses Compensated Absences and officially took effect for reporting periods beginning after December 15, 2023. This new standard introduces critical updates to how liabilities for employees’ earned leave are recognized and measured.

At Brady Martz, we understand the complexities of implementing new standards. While the December 31, 2024, deadline marked the first reporting cycle under GASB 101, the new year provides an opportunity to refine processes, address challenges, and establish strong compliance practices for the future.

What is GASB 101?

GASB 101 replaces previous guidance under GASB Statement No. 16, offering a clearer and more consistent approach to measuring liabilities for compensated absences, including:

  • Vacation leave
  • Sick leave
  • Paid time off (PTO)
  • Other forms of compensated absences

The key improvement is GASB 101’s “single comprehensive model,” which ensures all types of leave are measured uniformly.

Key Changes Under GASB 101

Government entities must focus on the following:

1. Recognition of a Liability:

  • A liability is recorded for compensated absences when earned by an employee and unused as of the reporting date.
  • This applies to unconditional leave (available regardless of conditions) and conditional leave (subject to specific criteria, like sick leave).

2. Measurement of the Liability:

  • The liability is measured using the employee’s current pay rate at the financial statement date.
  • Factors like leave caps and forfeiture policies must also be considered.

3. Streamlined Approach:

  • GASB 101 unifies the reporting process across all leave types, minimizing inconsistencies.
  • The model applies to leave accrued under individual policies or collective bargaining agreements.

4. Enhanced Disclosures:

  • Financial statements must clearly disclose information about compensated absences, including leave types, measurement methods, and key assumptions.

Why It Matters in 2025

While the December 31, 2024, reporting deadline has passed, 2025 audits and financial reporting will reflect the first full year under GASB 101 compliance. Agencies must ensure proper implementation to avoid reporting errors and compliance issues.

Key reasons to act now:

  • GASB 101 may increase reported liabilities depending on current leave accrual practices.
  • Auditors will expect robust tracking systems and processes that align with the new standard.
  • Proactive measures can simplify year-end reporting and reduce last-minute adjustments.

How to Get an Early Start on Compliance

Use the early months of 2025 to strengthen your processes and ensure long-term compliance:

1. Evaluate Policies and Agreements:
Review leave policies and collective bargaining agreements to fully understand how compensated absences are earned, accrued, and forfeited.

2. Assess Leave Tracking Systems:
Ensure systems can accurately track leave balances, including conditional leave that requires eligibility adjustments.

3. Analyze Financial Impact:
Work with financial experts to reassess liabilities under GASB 101 and determine any necessary adjustments for upcoming reports.

4. Update Reporting Processes:
Enhance financial statement disclosures to meet GASB 101 requirements.

5. Collaborate with Auditors:
Engage auditors early to confirm your compliance approach and address potential challenges before year-end.

Brady Martz: Your Partner in Compliance

At Brady Martz, we specialize in helping government agencies navigate complex accounting standards like GASB 101. Our Government Niche team offers tailored support for:

  • Policy and system evaluations
  • Liability calculations and impact analysis
  • Enhanced reporting and disclosures
  • Audit preparation and compliance reviews

Start 2025 on the Right Foot

The new year is the perfect time to refine your processes and ensure compliance under GASB 101. By taking proactive steps now, your agency can approach 2025 audits with confidence.

If you need assistance, contact the Brady Martz Government Niche team. We’re here to guide you every step of the way.

For more information, visit our Government Services page or reach out directly to discuss your agency’s needs.