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Forensic Accounting

does company have to make provision for unused annual leave even if it does not pay for it?

Our company does not pay employees for unused annual leaves. Instead, they will allow employees to offset the balance when they resign from the company. According to our auditor, even we don't pay cash to the employees, we still have to make provision for it in our financial report. Is it correct? Kindly assist.

Thank you


asked Apr 10 in IAS 19 - Employee Benefits by anonymous

1 Answer

0 votes
As per the labor rules in your country, is it required to pay for unused annual leaves? If it is not then I don't see any such requirement. Also is it required to carry forward the unused leave to the following year?

By the way as a general rule, whenever your auditor says something which you doubt about, ask him to show the relevant IFRS standard/provision. And then read it yourself and see whether you are satisfied.
answered Apr 10 by JaneM Level 2 Member (4,320 points)
Hi Jane

Thanks for your reply. No, it is not required to pay for the unused leave balance since the employees are allowed to offset it with their notice period. So it is a bit weird if we don't have to pay for it, but we still have to make provision.I checked IFRS 19 about staff benefits and it did not say anything about the case that my company has. Anyway, I checked with my ex auditor from KPMG and he showed me a screenshot that said we still had to make provision even if we did not pay for it.  Strange though..