Preparing for GASB 101: Key Steps for a Smooth Transition
by Cameron D. (Cami) Kolb, CPA, CMA, Senior Associate
Posted on August 26, 2025
So, by now you’ve all heard time and time again about the changes imminently hitting your compensated leave calculations, and what likely will change: estimating leave used versus paid out versus lost, what types of leave are significant, etc, as well as gotten suggestions on how to prepare for the change. Likely, all of this came around summertime, as one fiscal year was closing and the next beginning, so there is a good chance this is not at the forefront of your mind as we move into AFR and audit season. I’d like to provide you with some pointers on effective ways to implement GASB 101 and prepare your compensated absences for the new requirements.
Start Early
Doubtlessly, you have heard again and again that the earlier you begin this process, the less stress you will have when it is time for the audit and report drafting. Extra time allows you to get into the details of the changes that need to be made, especially the estimates, and gives you ample time to do so without a deadline looming over your head. Completing and implementing these changes in a rush right before the audit can lead to more errors and a delayed report, as well as additional work on your end. You also would be able to delegate some of the work, such as the estimation of how much vacation leave is used during the year to the HR or Payroll Department, rather than having a Business Manager do everything. If you are a HeinfeldMeech client and have completed the assessment that our firm sent out for compensated absences, that is great! If not, you will need to set some time aside to determine what types of leave your District has, along with how likely these leave types are to be used.
As a reminder, you will want to assess leave that is ‘more likely than not’ to be used – that is, there is a 50% or more chance of the leave being used. Compensated absence liability must be recognized for leave that has not yet been used and is for services already rendered, accumulating, and is not dependent on a sporadic event. While this is easy to identify for some types of leave, such as vacation or military, it may not be as easy for something like sick leave. As a general rule (and this can depend on a lot of situations, so please make the assessment yourself), sick leave should not be recognized if it does not carry over between fiscal years and/or is not paid out at termination; in other words, a ‘use it or lose it’ type leave. Sick leave is likely to be recognized if it carries over and is expected to be used or paid out to employees. Is your brain spinning yet? Again, this is why it is vital to start sooner, rather than later, so that you have plenty of time to wade through the murky waters of GASB 101 implementation.
Recalculate Beginning Balances
This is unarguably the most tedious part of the GASB 101 implementation – going through each individual employee or leave type, and recalculating their ending balance from the prior year, before even starting to fill out your compensated absences for the year. However, due to the nature of the estimates that will be updated, many of your compensated absence balances will change materially, and failure to recalculate your beginning balances could lead to inaccurate data being presented to your stakeholders, as well as audit findings for materially misstated financial statements.
Recalculating your beginning balances will be tedious, but it should be simple once you have determined what kind of leave needs to be calculated and how. From there on, it will be a matter of applying those estimates to the prior year. For example, if you estimate that employees, on average, will use 10 hours of vacation leave during the year, you will add 10 days times the payout rate to your ending balance calculations for employees’ vacation leave (from FY24), and that will become your recalculated beginning rate.
Review
Finally, a new GASB pronouncement is a great opportunity to review your current policies and decide if they need updates. The former compensated absence GASB pronouncement, GASB 16, went into effect in 1993, and chances are your policies have not been touched since then! Updates you might want to make could be, for starters, the actual amounts offered to employees, and the maximums established for those amounts. The payout rates should be reviewed as well, especially if they are based on flat rates rather than an employee’s pay. There is nothing wrong with using a flat rate, but again, if this rate was established 30 years ago, it is worth looking at again.
Establishing policies for those less common types of leave, such as military leave and sabbatical leave, is a good idea, even if it is not a very common type of leave, just to ensure you are prepared for any situations that may arise. Even if your policies do not need to be changed, it is a good idea to review them nonetheless, to ensure that leave balances are being accrued correctly. Reviewing and updating your policies does not need to be a whole song and dance; think of it more as a spring cleaning, rather than a complete renovation.
While GASB 101 is a big change, it is not too complicated once the initial assessments are complete. Take care to remember the three R’s in implementation: Review, Recalculate, Right Away. While there will certainly still be questions and concerns about the implementation, you will have a solid base, and plenty of time to ask and answer said questions, before the deadline is right around the corner. Employing these tactics will ensure that your implementation process is as painless as possible and done thoroughly and accurately, and your auditors (and your staff) will thank you! As always, if you have any questions on implementation, please feel free to reach out to your audit team.
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