Accruals

Question 1

If the payment of employee’s compensation for future absences is probable, the amount can be reasonably estimated, and the obligation relates to rights that accumulate, the compensation should be:

Answer 1

accrued if attributable to employees’ services already rendered.

Four conditions are necessary for accrual of employees’ compensation for future absences according to provisions in FASB ASC 710-10-25-1. The four conditions are:

rights to compensation vest or accumulate,
payment of compensation is probable,
amount of payment can be reasonably estimated, and
the compensation is attributable to employees’ services already rendered.