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6 Cards in this Set
- Front
- Back
- 3rd side (hint)
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Postemployment Benefits
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-Paid by companies to former or inactive employees during the period after their employment.
-Not the same as postretirement benefits. |
Types: Salary continuation, severance benefits, continuation of other fringe benefits (insurance), job training, disability related (including workers' compensation).
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Liability Recognition
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-Liabilities for postemployment benefit are accrued if all of the following conditions are met:
1. The employer's obligation is attributable to services already rendered* 2. The obligation relates to right that vest or accumulate* *Liability |
3. Payment of the compensation is probable**
4. Amount can be reasonably estimated** **Contingency DR. Severance Expense CR. Severance Liability -Footnote disclosure required when all 4 criteria aren't met. |
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Deferred Compensation Arrangements
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-Pension and postretirement benefit plans are a form of deferred compensation. Many companies also offer deferred compensation arrangements that are individual employment contracts.
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-These contracts must be accounted for individually on an accrual basis.
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Liability Recognition
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-Accounted for at the PV of the benefits expected to be provided in exchange for the employee's service to date.
-If terms of deferred compensation arrangement attribute all or a portion of expected future benefits to an individual year of employee's service, cost of benefits should be recognized in that year. |
-If terms attribute all or a portion of expected future benefits to a period of service greater than one year, the cost of those benefits should be recognized in a systematic and rational manner over that period.
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Compensation for Future Absences
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-Sick pay (vesting and carries over)
-Should be accrued in the year earned if all of following are met: 1. Employer's obligation to compensate employees for future absences is attributable to services already rendered by employees* 2. Payment of the compensation is probable** 3. Amount can be reasonably estimated** |
4. The obligation relates to rights that vest (aren't contingent on an employee's future service) or accumulate (may be carried forward to one or more accounting periods subsequent to that in which earned)*
*Liability **Contingency -Same 4 that must be met to recognize liability for postemployment benefits and postretirement benefits other than pensions. If only first 3 are met, disclosure in F/S's is adequate. |
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Sick Pay Benefits
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-Accrue for vesting
-Employer is not required to accrue a liability for non vesting accumulated rights to receive sick pay benefits b/c the lower degree of reliability of estimates for future sick pay. |
-Cost of making and evaluating those estimates also doesn't justify making an accrual.
-Employer should accrue if the 4 criteria are met and the estimate is reliable. |
