The amount of the liability for compensated absences should be based on1. the current rates of pay in effect when employees earn the right to compensated absences.2. the future rates of pay expected to be paid when employees use compensated time.3. the present value of the amount expected to be paid in future periods.
A) 1.
B) 2.
C) 3.
D) Either 1 or 2 is acceptable.

Question

Quizplus · Accepted Answer

The liability for compensated absences should be based on either the current rates of pay in effect when employees earn the right to compensated absences or the future rates of pay expected to be paid when employees use compensated time. This accounts for the fact that the actual cost to the employer can be based on rates at the time of earning or at the time of taking the absence, depending on the policy and accounting standards applied.

The Amount of the Liability for Compensated Absences Should Be