The Governmental Accounting Standards Board has published an exposure draft that establishes guidance for termination benefits to state and local government employers.

The draft, Accounting for Termination Benefits, would establish accounting guidance for such issues as early-retirement incentives and severance benefits, provided as the result of voluntary or involuntary terminations.

GASB said that the statement is intended to enhance comparability of financial statements by requiring governments to account for similar termination benefits in the same manner. The proposal would require employers to recognize, in financial statements prepared on an accrual basis, the cost of voluntary termination benefits when the offer is accepted and the cost of involuntary termination benefits when a plan of termination has been approved and communicated to employees. The proposal would also establish measurement and disclosure requirements for termination benefits.

If enacted, the proposed standard would become effective in two parts. For termination benefits provided through an existing defined-benefit OPEB plan, the provisions of the new GASB statement would be implemented simultaneously with the requirements of GASB Statement No. 45, Accounting and Financial Reporting by Employers for Post-employment Benefits Other Than Pensions.

For all other termination benefits, the proposed statement would be effective for financial statements for periods beginning after June 15, 2005.

The deadline for comments is March 11, 2005. The ED is available on GASB's Web site at

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