2130
Employee Payables
ASC 710: Compensation - General
📖 Overview
This standard addresses accounting treatment for general compensation, including salaries, wages, bonuses, and compensated absences.
🎯 Scope
This standard applies to the accounting treatment for general employee compensation, including:
- Salaries and wages.
- Bonuses.
- Compensated absences: vacation leave, holidays, sick leave.
⚙️ Key Principles
1. **Salaries and Wages**:
- Recognized as an expense in the period the employee renders service.
- Recorded on the accrual basis.
2. **Bonuses**:
- Recognized as an expense when payment is probable and the amount can be reasonably estimated.
3. **Compensated Absences**:
- **Vesting**: Absences that employees are entitled to even if they terminate employment.
- **Non-Vesting**: Absences that employees are not entitled to upon termination.
- **Vesting Absences**: Accrued as an expense when the employee renders service that grants the right to the absence.
- **Non-Vesting Absences**: Recognized as an expense when actually taken.
✅ Recognition
**Salaries, Wages, and Bonuses:**
- Recognized as an expense in the period the employee renders service.
- A liability (Salaries Payable) is recorded at period end.
**Vesting Compensated Absences:**
- Recognized as an expense and liability when the employee renders service.
- Accrued even if the employee may not use them.
**Non-Vesting Compensated Absences:**
- Not accrued in advance.
- Recognized as an expense when actually taken by the employee.
📏 Measurement
**Salaries and Wages:**
- Measured at the gross amount due to the employee for the period.
- Mandatory deductions (taxes, social insurance) are subtracted.
**Bonuses:**
- Measured at the best estimate of the amount expected to be paid.
- If bonuses are based on company profits, they are estimated based on expected profits.
**Compensated Absences:**
- For vesting absences:
- Measured at the amount that will be paid to the employee when the absence is taken.
- Estimated based on the employee's current pay rate.
- For non-vesting absences:
- Not accrued in advance.
- Measured at the actual amount paid when taken.
📊 Presentation
**On the Balance Sheet:**
- Accrued salaries, wages, and bonuses appear within current liabilities.
- Unused accrued compensated absences appear within current liabilities.
**On the Income Statement:**
- Salaries and wages expense appears within operating expenses.
- Bonus expense appears within operating expenses.
**Note Disclosures:**
- Accounting policies for compensation.
- Amount of accrued compensated absences (if material).
- Bonus terms (if any).
📝 Disclosure Requirements
Disclosures required:
- Accounting policies for compensation (including treatment of compensated absences).
- Amount of salaries and wages expense for the period.
- Amount of bonus expense for the period.
- Total liabilities related to accrued compensated absences.
- Terms of bonus plans (if any).
- Any material changes in compensation policies.
🔗 Related Standards
ASC 715 (Retirement Benefits), ASC 718 (Stock-Based Compensation)
📁 Related Accounts in the Chart of Accounts
Explore accounts commonly associated with this accounting standard.