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GASB 101 Compensated Absences: Measuring the Leave Liability for Governments and School Districts
Last updated: October 10, 2026 · Independent guide · We do not sell rankings or coverage.
Under GASB 101 compensated absences rules, a government records a liability for unused leave when the leave is attributable to services already rendered, accumulates, and is more likely than not (a likelihood of more than 50 percent) to be used for time off or paid in cash or a noncash settlement. It is measured at each employee’s pay rate at the financial statement date, plus salary-related payments such as employer Social Security and Medicare. Statement No. 101 replaced GASB Statement No. 16 for fiscal years beginning after December 15, 2023. The biggest change for most school districts is sick leave, which must now be accrued for expected use as time off, not only for termination payouts.
The recognition rule and the journal entries
Statement 101 applies one model to every leave type (GASB Statement No. 101, June 2022, paragraphs 9 to 19). For each employee and leave type, the year-end liability is:
Liability = (unused hours more likely than not to be used or paid) × pay rate at the financial statement date (or the different rate at which the leave will be settled) + directly and incrementally associated salary-related payments + leave already used but not yet paid
Parental, military and jury duty leave is recognized only when it commences. Unlimited leave and fixed-date holidays are recognized only when used. Leave likely to convert to defined benefit pension or OPEB benefits is excluded (paragraphs 13 to 15). Sick leave follows the general test. The entries below apply in the government-wide statements and proprietary funds.
| Account | Debit | Credit | Note |
|---|---|---|---|
| Salaries and benefits expense (by function) | Increase in liability | Year-end true-up at year-end pay rates | |
| Compensated absences liability | Increase in liability | Split current and noncurrent | |
| Payroll tax expense (employer FICA) | Salary-related amount | Defined contribution amounts go to pension or OPEB expense | |
| Compensated absences liability | Salary-related amount | Never include defined benefit amounts | |
| Net position, beginning (restatement) | Transition adjustment | Adoption year only (Statement No. 100) | |
| Compensated absences liability | Transition adjustment | GASB 101 balance less GASB 16 balance |
Worked example: a school district at June 30, 2026
All figures here are an illustration. Maple Valley School District has a June 30 year-end, adopted Statement 101 in fiscal 2025 and reported a liability of $940,000 at June 30, 2025. In practice you calculate each employee at their own rate; group averages keep the steps readable.
Step 1: Inventory leave types and apply the exceptions. Twelve-month staff earn vacation with a 240-hour carryover cap. Teachers earn uncapped sick leave, paid at 50 percent of their rate on retirement. Nobody was on parental leave at June 30, and fixed-date holidays are excluded.
Step 2: Estimate the share of each balance that is more likely than not to be used or paid. Five years of history show 96 percent of year-end vacation hours are later used or paid. Of teacher sick hours, 30 percent are later used as time off, 10 percent are paid at retirement and 60 percent are forfeited. Paragraph 12 lists the factors to weigh: policies, eligibility, historical use, payment and forfeiture, and whether history will repeat.
Step 3: Measure at year-end pay rates.
| Component (illustration) | Hours recognized | Rate | Amount |
|---|---|---|---|
| Vacation: 6,000 hours × 96% | 5,760 | $38.00 | $218,880.00 |
| Teacher sick leave used as time off: 48,000 × 30% | 14,400 | $45.00 | $648,000.00 |
| Teacher sick leave paid at retirement: 48,000 × 10% | 4,800 | $22.50 (50% of $45.00) | $108,000.00 |
| Employer FICA on vacation (7.65%) | $16,744.32 | ||
| Employer Medicare on teacher sick leave (1.45%) | $10,962.00 | ||
| Liability at June 30, 2026 | $1,002,586.32 |
Step 4: Add salary-related payments. Employer Social Security is 6.2 percent and Medicare 1.45 percent (IRS Topic 751, September 24, 2026). Here, teachers are outside Social Security and pay Medicare only, which applies to state and local employees hired after March 31, 1986 who are not under a Section 218 agreement (SSA, Mandatory Medicare Coverage, no date shown). Both groups are in a state defined benefit plan, so no pension amount is added.
Step 5: Book the change and split it. The liability rose by $62,586.32. The district expects $612,000 to be used or paid within one year.
| Account | Debit | Credit | Note |
|---|---|---|---|
| Instruction and support services expense | $62,586.32 | Government-wide conversion entry | |
| Compensated absences liability | $62,586.32 | $612,000 due within one year; $390,586.32 noncurrent | |
| Salaries expenditure (General Fund) | $14,200.00 | Retiree payouts owed at June 30 and paid in July | |
| Accrued compensated absences payable (fund) | $14,200.00 | Matured amount payable from current resources |
Under GASB 16, the $648,000 of sick leave expected to be used as time off would not have been accrued. Milliman, which sells actuarial services, reports that leave projected to be paid while employed could be as much as 10 to 20 times the leave projected to be paid at termination or retirement (Milliman, March 19, 2026).
The standard behind the calculation
Paragraph 7 of Statement 101 supersedes Statement No. 16, under which sick leave was accrued only for expected termination payments, using the termination payment method or the vesting method (GASB research memorandum, November 4, 2019). As the GFOA’s technical services director wrote, sick leave now falls under the same test as vacation and PTO (Government Finance Review, August 2022).
Paragraphs 16 to 19 set measurement: the year-end pay rate, a different rate when leave settles at one (such as the 50 percent payout above), and a representative rate for pooled leave such as a donated leave pool. Paragraphs 22 to 26 include defined contribution amounts and exclude defined benefit pension and OPEB amounts. The New York State Comptroller also excludes active-employee health and life insurance, retirement incentives and longevity bonuses (NY OSC bulletin, September 2025). Paragraph 29 keeps governmental funds on the current financial resources measurement focus, so fund expenditures cover only amounts normally liquidated with expendable available financial resources.
Common mistakes
- Carrying the GASB 16 sick leave method forward. Accruing only payouts understates the liability.
- Including defined benefit pension contributions. Paragraph 26 excludes them because the actuarial measurement of defined benefit pension and OPEB liabilities already projects the effect of leave payments (paragraph B53).
- Ignoring sick leave that converts to pension service credit. Where a state plan converts unused sick leave into service credit, paragraph 13 excludes that portion.
- Using a blended district rate for everyone. Measure at each employee’s rate and tax status.
- Undocumented judgment. Keep the usage history, contract terms and reasoning behind each percentage for your auditors.
How to report it: restatement and disclosures
Restatement in the adoption year. Paragraph 33 treats adoption as a change in accounting principle under Statement No. 100. You restate beginning net position, show the adjustment on the face of the statements, and add a note table reconciling previously reported beginning balances to restated balances by reporting unit (Ohio Auditor of State, GASB 100 FAQs, no date shown). As an illustration, a district with a GASB 16 liability of $410,000 and a Statement 101 liability of $905,000 at July 1, 2024 would reduce beginning net position of governmental activities by $495,000. Governmental fund balances are usually unaffected.
Ongoing note disclosures. In the long-term liabilities note, you may show one net change labeled as net, and you no longer disclose which funds liquidate the liability (paragraphs 30 and 31). The amount due within one year is still required. The proposed disclosure of the flows assumption (FIFO, LIFO or weighted average) was dropped from the final statement (Cherry Bekaert, February 19, 2024, a CPA firm).
What the HR and payroll system must supply
Agree this extract with HR and payroll before year-end, ideally as a saved report. If you are reviewing HR and HRIS software, test these outputs in demos.
| Data | Detail needed | Used for |
|---|---|---|
| Leave balances | Hours or days by employee and leave type at the exact year-end date | Starting quantity |
| Leave plan rules | Accrual rate, carryover cap, payout percentage and cap by bargaining unit | Accumulation test and settlement rate |
| Usage history | Three to five years of hours used, paid out at separation and forfeited, by employee group | More-likely-than-not percentages |
| Pay rates | Rate in effect at year-end | Measurement |
| Tax and retirement codes | Social Security or Medicare-only status; pension plan type | Salary-related payments |
| Leave in progress | Parental, military or jury leave days remaining | Commenced-leave exception |
| Function and fund coding | Function, fund and grant | Allocating expense by function |
Grant coding matters because leave charged to federal programs feeds your schedule of expenditures of federal awards.
How ERP and payroll systems automate it
Public sector systems produce the balance and rate side. None of the vendor documentation we reviewed applies usage probabilities or salary-related percentages, so the estimate is usually finished in a spreadsheet or actuarial model. For broader options, see our accounting software guide.
Workday. The Time Off Liability report values each worker’s balance as of a chosen date, using annual salary divided by an annualization factor (Workday documentation, June 23, 2023).
Tyler Munis. A Flexible Period Liability Report runs from Payroll > Accrual Processing > Employee Accruals Report, with Rate set as a print column for a selected accrual type (Tyler Technologies, December 14, 2020). Payout caps and payroll taxes are not described.
SchoolFront. This K-12 attendance product lets you flag absence codes as “District Liable for Accrued Balance” with a rate and factor, then export an Accrued Liability report (SchoolFront Help Center, January 22, 2026). Payroll taxes and usage history are not addressed.
How we researched this
We read Statement No. 101 and GASB’s research on Statement 16, guidance from the GFOA, New York State Comptroller, TASB and Ohio Auditor of State, and the top-ranking CPA and actuarial firm explainers. Product statements come from vendor documentation. Example figures are illustrative.
Related guides
- Modified Accrual Accounting for Governmental Funds
- GASB 34 Reporting: Requirements and 2026 Changes
- GASB 68 Pension Reporting for Governments and Schools
Frequently asked questions
When does GASB 101 take effect?
For fiscal years beginning after December 15, 2023: the year ended June 30, 2025 for a July 1 school district and December 31, 2024 for a calendar-year government. Earlier application was encouraged.
Do we have to accrue sick leave that is never paid out?
Often, yes. If it accumulates and history shows some of it is more likely than not to be used as time off, that portion is a liability. Leave forfeited under a use-it-or-lose-it policy at year-end does not accumulate and is not accrued (TASB, July 8, 2022).
Which payroll costs go into the compensated absences liability?
Include employer Social Security and Medicare and defined contribution amounts tied to the leave. Exclude defined benefit pension and OPEB amounts.
How is the adoption reported?
As a change in accounting principle under Statement No. 100, by restating beginning net position with a reconciling note table. Required supplementary information for earlier periods is not restated.
Sources
- Governmental Accounting Standards Board, Statement No. 101, Compensated Absences, June 2022. storage.gasb.org
- Governmental Accounting Standards Board, Research Memorandum: Compensated Absences Reexamination, November 4, 2019. storage.gasb.org
- Michele Mark Levine (GFOA), “GASB 101. Literally.” Government Finance Review, August 2022. sccounties.org
- New York State Office of the State Comptroller, Accounting and Financial Reporting for Compensated Absences as Required by GASB Statement 101, September 2025. osc.ny.gov
- Ohio Auditor of State, GASB 100 FAQs, no date shown. ohioauditor.gov
- Texas Association of School Boards, New Requirements for Reporting of Compensated Absences, July 8, 2022. tasb.org
- Internal Revenue Service, Topic No. 751, Social Security and Medicare Withholding Rates, September 24, 2026. irs.gov
- Social Security Administration, Mandatory Medicare Coverage, no date shown. ssa.gov
- Milliman, A Public Benefit Plan Sponsor’s Guide to GASB Statement No. 101: Compensated Absences, March 19, 2026 (actuarial firm). milliman.com
- Cherry Bekaert, GASB 101: Compensated Absences Update, February 19, 2024 (CPA firm). cbh.com
- Workday, Report Liability for Time Off, June 23, 2023 (vendor documentation). doc.workday.com
- Tyler Technologies, Accrual Liability Report (Munis), December 14, 2020 (vendor documentation). tylernow.atlassian.net
- SchoolFront, Accrued Liability Reporting, January 22, 2026 (vendor documentation). support.schoolfront.com
Sherman Hsieh
Independent analysis of enterprise software — ERP, CRM and more
