Why we complicate a very simple way of calculating

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Reference no: EM13130921

We have at least 10 employees who have worked with us since the company commenced operations in 2000. In accordance with the Employee Bargaining Agreement (EBA) all employees are entitled to long service leave of 13 weeks if they remain in service for 10 years. They are also entitled to pro rata long service leave after 8 years of service. Until the financial year ended 30 June 2011, the company recorded long service leave expense when it was paid to the employee. This happened of course when the leave was taken.Of course we maintain a memorandum record of the number of days each employee is entitled to. John has indicated to us that he thinks we should consider treating this expense in a different manner, as the company is now a large proprietary company and has to prepare general purpose financial statements, as it is a reporting entity. The directors are wondering why we should complicate a very simple way of calculating long service leave – why not “stick with” recognising the expense when we pay for it? What do you think we should do?

Reference no: EM13130921

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