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Hello
I’m looking at an example in bpp text but I do not understand the thought process behind the answer. I am kindly requesting your assistance. The e.g. is:P Co has 100 employees. Each is entitled to 5 working days of paid sick leave (sl) for each year. Unused sl can be carried forward for 1 year. SL is taken on a LIFO basis i.e. current year’s entitlement first then from any balance b/f.
As at 31 Dec 20×8, the average unused entitlement is 2 days per employee. P Co expects based on past experience that 92 employees will take 5 days or less leave in 20×9, the remaining 8 employees will take an average of 6.5 days each.
RTF: State the required accounting for sick leave.
The answer states that a liability of 12 days should be recognised (1.5 days x 8 employees).As mentioned before, I do not understand the thought process behind it and I am requesting your assistance please.
What I got was as follows:
2=bal bf
5=curr year balance
7=total available
6.5=average taken by remaining 8 employeesthe above gives a liability of 0.5 days x 8 employees=4 days
Hello
I am seeing posts after mine which have been answered, I’m thinking that you may have missed mine in error.No nari, I haven’ missed it. I’ve just got to give it a bit more thought before I answer it. Don’t stress.
I’ve located my copy of the study text and had a look at the question you asked and the key is that for any accumulating paid absences, which is what is happening in this scenario, the cost is measured at the additional amount the company has to pay as a result of the unused entitlement. Here the unused entitlement is for the 8 employees only who will take an additional 1.5 days, giving a total of 12 days.
The aim is to accrue additional expenditure for staff who we expect to be sick in the following year, as they will have worked in the current year and earned the right to receive the additional sick pay.
Thanks
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