When paid leave needs an accrual under IAS 19 and why expected use matters more than the outstanding balance.
Luca Briefs1/7
Leave accrual
No cash payout? Leave may still need accruing
IAS 19 requires accrual for accumulating paid absences, whether or not unused leave can be paid out on departure.
Leave types
Does unused leave carry forward?
Accumulating absences carry forward and require accrual. Non-accumulating absences lapse if unused, provide no cash payment for unused entitlement and are recognised when absences occur.
Quick check
Does the leave have to be vesting?
No
Accrue accumulating paid leave as employees render service that increases their entitlement. The requirement applies to both vesting and non-vesting leave.
Expected cost
Accrue the leave you expect to be used
IAS 19 measures the accrual at expected cost, so it covers only leave expected to be used or encashed. Only fully vesting leave is accrued in full.
Period mismatch
Check what survives the reporting date
With calendar-year sick leave and a 31 March year-end, unused entitlement has not yet lapsed at the reporting date. Leave that ordinarily lapses may therefore require accrual.
Reporting checks
Review entitlement, timing and expected use
1Identify leave carried forward at the reporting date.
2Check whether leave and accounting periods align.
3Accrue the portion expected to be used or encashed.
