Compensated Absences and P28

8/10/2019 Compensated Absences and P28

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Compensated Absences

GROUP 1


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Short Term Employee Benefits

employee benefits other than termination benefits

which are due to be settled within 12 months after

the end of the period of the employee's services are

rendered

1. salaries, wages & social security contributions

2. short term compensated absences(i.e paid annual

& sick leave)

3. profit sharing and bonuses payable

4. nonmonetary benefits(i.e medical care & housing)


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Short-term Compensated Absences

Reasons:

o vacation

o sickness

o maternity/paternityo short-term disability

o military service

2 categories:

o accumulating

o nonaccumulating


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Accumulating compensated absences

o are carried forward and used in future

periods if the current period's entitlement is

not used in fullo 2 Types:

Vesting- employees are entitled to cash payment

for unused entitlement on leaving the entity

Nonvesting-employees are not entitled to cash

payment for unused entitlement on leaving the

entity


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Accumulating Compensated Absences

o the obligation arises as employees render

service which increases their entitlement tofuture paid absences

o the obligation is recognized and exists in

both vesting and nonvesting


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Nonaccumulating CompensatedAbsences

o are not carried forward

o lapses if the current period's entitlement isnot used

o does not entitle employees to a cash

payment for unused entitlement on leavingthe entity

o there is no obligation (i.e liability or expense)

until the times of the absence


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Employee Days

Accrued

Jan. 12014

Daily Rate

Jan. 1

2014

Days

Earned

2014

Days

Taken

2014

Daily Rate

Dec. 31 2014

Andrew 20 P68 15 13 P70

Brad 15 74 15 15 76

Charles 25 62 7 32 Terminated

June 15- Rate=

P64

Denise -5 56 15 20 58

Emma 40 78 15 5 82

Frank Hired

July 1

60 8 2 60


8/17

Requirement 1


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Employee Days

Remaining

Ending Rate Liability

Andrew 22 P70 P 1 540

Brad 15 76 1 140

Charles 0 64 0

Denise (10) 58 (580)

Emma 45 82 3 690

Frank 6 60 360

Total Liability

Dec. 31 2014

P 6 150

NOTE:

Maximum

of 45 days

only (i.e

Emma)

*Days Remaining = Days accrued + Days earned Days used


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Employees Days Used Average Rate Liability

Andrew 13 69 P 897

Brad 15 75 1 125

Charles 32 64 2 048

Denise 20 57 1 140

Emma 5 80 400

Frank 2 60 120

TOTAL PAYMENT on

December 31, 2014

P 5 730


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Employee Days Accrued Daily Rate

(January 1,

2014)

Liability

Andrew 20 68 P 1 360

Brad 15 74 1 110

Charles 25 62 1 550

Denise (5) 56 (280)

Emma 40 78 3 120

Frank 0 60 0

Total Accrued

Liability, beg.

P 6 860


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Dec. 31, 2014 Compensated Absences Payable 5 730

Cash 5 730

*The use of vacation days extinguishes the liability.


13/17

Total liability, 2014 (P6 150 + 5 730) P 11 880

Accrued liability, Jan. 1, 2014 ( 6 860)

Expense to be recognized in 2014 P 5 020

Dec. 31, 2014 Compensated Absences Expense 5 020

Compensated Absences Payable 5 020


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Requirement 2


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Cash 5 730


16/17

Computation

Year Payment PV Factor

of 1

(i=12%)

Liability

Paid

Increase

(10%)

Cash

Paid

2015 P 2 050 0.89286 P 1830 P 183 P 2013

2016 4 100 0.79719 3268 327 3595

Earlier, we computed the liability for compensated expenses at

Dec. 31, 2014 which amounts to P 6150.


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Dec. 31, 2016 Compensated Absences Expense 327


Cash 3 595

Dec. 31, 2015 No entry

June 30, 2015 Compensated Absences Expense 183


Cash 2013

The cash paid depends on the rates when employees actually usedthe

compensated time.

Documents

Compensated Absences and P28