Question
How do companies accrue compensated absences? A. US GAAP does not directly address this issue, but companies will generally accrue at the future rate. This
How do companies accrue compensated absences?
A. US GAAP does not directly address this issue, but companies will generally accrue at the future rate. This is the theoretically correct approach because that is when the employee takes the compensated absence
B. US GAAP requires companies to accrue at the current rate because the future rate is uncertain. uncertain lower current rate is debited to compensation expense in the year the compensated absence is paid.
C. US GAAP requires that companies accrue at the current rate rather than using the estimated future salary or wage rate expected to be in effect when the employee takes the compensated absence. This is the theoretically correct approach because the future rate is uncertain.
D. US GAAP does not directly address this issue, but companies will generally accrue at the current rate rather than using the estimated future salary or wage rate expected to be in effect when the employee takes the compensated absence. This is the theoretically correct approach when the future rate is uncertain. However, when future rates are known, they should be used in the accrual. If future rates increase in the period of payment and the current rate was used in the accrual, the difference between the higher future rate and the lower current rate is debited to compensation expense in the year the compensated absence is paid.
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