Minutes of Videoconference, December 1–3, 2020

The Board began deliberations of the Compensated Absences project by discussing transition and effective date requirements and the comment period to be included in the Exposure Draft of a proposed Statement. First, the Board tentatively decided to propose transition provisions that (a) require retroactive application through restatement of all prior-period financial statements presented; (b) allow that if retroactive application is not practicable for all periods presented, the cumulative effect at the beginning of the earliest period presented should be restated; and (c) require, in the first period of application, disclosure of the nature of the restatement and its effect, as well as the reason for not restating prior periods presented, if applicable. The Board then tentatively decided to propose an effective date of reporting periods beginning after December 15, 2022. Next, the Board tentatively agreed that early implementation of the proposals should be encouraged. The Board also tentatively agreed that the comment period for the Exposure Draft should be approximately 90 days, and should end on June 4, 2021.
 
The Board continued deliberations by reviewing a draft of the Standards section of an Exposure Draft and discussing clarifying edits. In addition, the Board decided to propose that governments be required to use a first-in, first-out flows assumption and that disclosure of the assumption not be required. The Board agreed that the project staff should prepare a preballot draft of an Exposure Draft for discussion at the January 2021 Board meeting.

Next, the Board discussed whether the expected benefits resulting from the application of the proposed requirements justify the perceived costs to preparers and other stakeholders. The Board tentatively decided that the expected benefits associated with the proposed requirements justify the perceived costs of implementation and ongoing compliance with the resulting accounting standards.
 
Lastly, the Board discussed the characteristics of the financial information that would be included in an Exposure Draft. The Board tentatively agreed that the proposed requirements in the Exposure Draft would meet all the characteristics of Group 1 and, therefore, are within the scope of the GASB’s authority.

Minutes of Videoconference, October 29, 2020
 
The Board began deliberations on the Compensated Absences project by discussing an overview of the processes used to conduct the user interviews. Then the Board discussed existing note disclosure requirements for compensated absences in light of the feedback received from those interviews. The Board tentatively agreed to retain the requirement to disclose the beginning and ending balances of the compensated absences liability. The Board then tentatively decided to propose providing an exception to paragraph 119b of Statement No. 34, Basic Financial Statements—and Management’s Discussion and Analysis—for State and Local Governments, such that governments only would be required to disclose the net change in the compensated absences liability for the reporting period (and would indicate such net disclosure). The Board also tentatively agreed to propose providing an exception to paragraph 119d of Statement 34 such that governments would not be required to disclose the governmental funds that typically have been used to liquidate the compensated absences liability.

The Board then considered issues related to the presentation and disclosure of the portion of the compensated absences liability that is due within one year of the statement date. The Board tentatively agreed to retain the requirements to present and disclose the amount of the compensated absences liability that is due within one year. The Board then discussed guidance related to the estimation of the portion of the compensated absences liability that is due within one year. The Board tentatively agreed to retain Question 7.22.4 of Implementation Guide No. 2015-1 and tentatively determined that additional guidance for estimating the amount due within one year should not be provided. Next, the Board discussed issues related to the flows assumption used to estimate the amount due within one year. The Board tentatively decided that a specific flows assumption should not be proposed. The Board then tentatively decided to propose that a default flows assumption be provided for governments that do not have an employment policy that determines the assumption. The Board further tentatively decided to propose that the default flows assumption provided be first-in-first-out. The Board also tentatively decided to propose that governments disclose the flows assumption that they use.

Next, the Board discussed potential additional disclosures related to compensated absences. The Board began this discussion by considering the disclosure of employment policies related to compensated absences and tentatively agreed that this disclosure should not be proposed. The Board also considered the disclosure of a measure of the closeness of a government’s workforce to retirement. The Board tentatively agreed that the closeness of the workforce to retirement should not be proposed to be disclosed. The Board considered other suggested disclosures that were raised during the user interviews and tentatively agreed that none of those additional disclosures should be proposed for compensated absences.

Finally, the Board discussed considerations related to the benefits and costs of the tentative decisions reached related to note disclosures. The Board tentatively decided that the expected benefits of the proposed note disclosure requirements justify the perceived costs of implementation and ongoing compliance.

Minutes of Videoconference, July 29, 2020
 
The purpose of the Board deliberations at this meeting was to determine which disclosure items should be explored further in interviews with financial statement users. The Board began deliberations by discussing the current note disclosure requirements for long-term liabilities, including the compensated absences liability, as found in paragraph 119 of Statement No. 34, Basic Financial Statements—and Management's Discussion and Analysis—for State and Local Governments, including (a) the beginning and ending balances of the liability, (b) increases and decreases in the liability, (c) the portion of the liability that is due within one year, and (d) the governmental fund(s) that historically have been used to liquidate the liability. The Board tentatively agreed that exceptions to those disclosure requirements for the compensated absences liability should be considered further in this project.
 
Next, the Board discussed the disclosure of employment policies related to compensated absences, which is a common voluntary disclosure. The Board tentatively agreed that the disclosure of employment policies regarding leave time should be considered further in this project.
 
The Board discussed potential note disclosures related to compensated absences associated with (a) the flows assumption (FIFO/LIFO) used to estimate the current portion of the compensated absences liability and (b) closeness of the workforce to retirement and tentatively agreed that these potential note disclosures should be considered further in this project. The Board also considered other potential note disclosures, such as (1) an estimated payment schedule, (2) disaggregation of additions and reductions by reason, (3) disaggregation of ending balance by type of leave, (4) disaggregation of ending balance by salary levels, and (5) utilization rates. The Board tentatively decided, however, that those potential disclosures should not be considered further in this project.

Minutes of Meetings, May 6–8, 2020

The Board began deliberations by discussing the general approach to measuring the compensated absences liability. The Board tentatively agreed that the measurement of the compensated absences liability should include absences that will be used as time off in future periods in addition to absences that will be paid out upon termination.
 
Next, the Board discussed issues related to the hours that should be included in the measurement of the compensated absences liability. The Board tentatively decided to propose that only hours that are more likely than not to be paid, either through payroll as paid time off or as a cash payment upon termination, should be included in the measurement. The Board also tentatively agreed to propose that, when a government pays out a percentage of the hours accumulated at termination, the government apply that percentage only to the estimated portion of the accumulated hours that will be paid out at termination. The Board then discussed whether specific guidance should be provided for estimating the amounts of leave that will be paid (either through time off or at termination). The Board tentatively decided to propose guidance in the form of factors to consider, such as historical information regarding the payment, usage, and forfeiture of accumulated leave as well as current and future employee eligibility when estimating the amount of leave that is more likely than not to be paid. The Board also tentatively decided not to propose a specific flow assumption (for example, last in-first out).
 
The Board then discussed accumulated leave that can be used as a retirement benefit. This includes: (a) accumulated leave that can be deposited into an account, which can be used to pay healthcare premiums or claims, and (b) accumulated leave that can be converted and factored into the formula that determines an employee’s pension or other post-employment benefit (OPEB) in a defined benefit plan. The Board tentatively decided to propose that accumulated leave that will be paid to a healthcare account be measured in the same manner as leave that will be paid to an employee. Furthermore, the Board tentatively agreed to propose that accumulated leave that will be factored into the benefit formula to determine pension or OPEB payments be excluded from the compensated absences liability.
 
Next, the Board discussed issues related to the pay rate to be used in the measurement of the compensated absences liability. The Board tentatively agreed to propose that the current pay rate at fiscal year-end be used to calculate the compensated absences liability. The Board also tentatively agreed to propose that in instances in which a government pays out a rate other than the salary pay rate at termination, the government apply that rate only to the estimated portion of the leave that will be paid out at termination. The Board also tentatively decided that the compensated absences liability should not be measured at present value.
 
The Board also discussed other measurement issues, and tentatively decided to propose that the general measurement guidance for unrestricted sabbatical leave from Statement No. 16, Accounting for Compensate Absences, be retained. The Board also tentatively decided to not address the following issues as a part of this project: (1) insurance for compensated absences, (2) the applicability of fiduciary activity guidance, (3) the right to offset the compensated absences liability against any assets designated to prefund compensated absences, and (4) the recognition of the compensated absences liability in internal service funds.
 
Lastly, the Board discussed salary-related payments associated with compensated absences. The Board discussed whether specific guidance on salary-related payments should be included in the measurement guidance for the compensated absences liability, and tentatively decided it should be. The Board tentatively agreed that salary-related payments should be accrued for all leave for which a compensated absences liability is recognized. The Board also tentatively decided to propose a general definition of includable salary-related payments as “items for which the payment of the salary-related item is directly and incrementally associated with payments made for compensated absences.” The Board then applied the definition of includable salary-related payments to various types of fringe benefits and tentatively agreed with the application. The Board also tentatively agreed to propose that the salary-related payments portion of the compensated absences liability be calculated using the current rate at fiscal year-end.

Minutes of Meetings, March 24–26, 2020

The Board began deliberations by discussing criteria for recognition of compensated absences in the financial statements using the economic resources measurement focus. First, the Board discussed the recognition criteria for compensated absences that are not contingent on a specific event according to Statement No. 16, Compensated Absences (vacation leave and similar leave). The Board tentatively decided to propose that the recognition model include the following criteria: (a) the compensated absence is attributable to services already rendered and (b) the compensated absence accumulates. The Board also tentatively decided not to propose that (1) payments are probable and (2) the amount can be reasonably estimated as recognition criteria. Those potential criteria again will be considered during the Board’s assessment of the measurement criteria proposals at a future meeting.
 
The Board then discussed other types of leave that are contingent according to Statement 16 (sick leave and similar leave). The Board tentatively decided a government becomes obligated for sick leave and similar leave when an employee earns the time off and the sick leave hours are made available to use. Therefore, the Board tentatively decided that sick leave and similar leave should follow the recognition model previously described.
 
Next, the Board discussed unrestricted and restricted sabbatical leave. The Board tentatively agreed that restricted sabbatical leave does not meet the Board’s tentative definition of a compensated absence. In addition, the Board also tentatively decided that unrestricted sabbatical meets the tentative definition of a compensated absence. Therefore, the Board tentatively decided to propose that unrestricted sabbatical leave follow the recognition model previously discussed. Additionally, the Board tentatively decided to propose specific guidance on the application of the accumulating criterion to unrestricted sabbatical leave.
 
The Board then discussed the application of the recognition criteria to various types of compensated absences. The Board tentatively agreed with the application of the recognition model to various types of compensated absences, with certain clarifications.
 
Finally, the Board discussed the recognition of compensated absences in governmental funds. The Board tentatively decided to propose carrying forward the existing guidance in Statement 16 and Interpretation No. 6, Recognition and Measurement of Certain Liabilities and Expenditures in Governmental Fund Financial Statements, for recognition of compensated absences in the governmental funds using the current financial resources measurement focus.

Minutes of Meetings, February 11-13, 2020

The Board began deliberations by discussing the definition of compensated absences.  The Board tentatively decided to propose amending the definition of compensated absences as follows:

• Combined paid time off (PTO)
• Accrued compensatory time
• PTO without specific limits
• Sabbatical leave
• Military leave.