In accounting for compensated absences, the difference between vested rights and
ID: 2435839 • Letter: I
Question
In accounting for compensated absences, the difference between vested rights and accumulated rights isa Vested rights are normally for a longer period of employmentthan are accumulated
rights.
b vested rights are not contingent upon an employee's future service.
c vested rights are a legal and binding obligation on the company, whereas
accumulated rights expire at the end of the accounting period in which they arose.
d vested rights carry a stipulated dollar amount that is owed to the employee;
accumulated rights do not represent monetary compensation.
Explanation / Answer
In accounting for compensated absences, the difference between vested rights and cumulated rights: Vested rights are not contingent upon an employee’s future service.
The FASB has determined that the right exists if payment for future absence vests or accumulates. Vested rights are those rights that are not contingent upon continued employment of the employee. That is, even if the employee terminates employment with the employer, the employer has an obligation to pay the employee the amount of the benefit. An accumulated benefit is a benefit that can be carried forward to future periods if it has been earned and not used.
(b) Vested rights are not contingent upon an employee’s future service.
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