Accounting Treatment related to Severance Pay Liability as at March 31, 2011

Context and Application:  In line with Treasury Board Accounting Standard 1.2 (TBAS 1.2), departments are reminded that they must account for their allowance and related severance pay liability in their 2010-11 financial statements. This applies to all organizations defined as departments in accordance with section 2 of the Financial Administration Act (FAA).

Calculation: The March 31, 2011 liability relating to Public Service employees is determined by multiplying 23.79% (compared to 23.27% at March 31, 2010) by the department's annual gross payroll at year-end subject to severance pay, which is the total of annual salary rates for indeterminate employees as at March 31, 2011. This percentage is derived from the actuarially determined liability for severance pay for the entire Public Service population. The 2010-11 annual expense for severance pay is determined by the difference between your opening and closing liability added to (or subtracted from) the actual severance expenditure for the year

Process:  The following accounting entry should be included in CFMRS to record the change in the severance pay liability relating to Public Service employees for the department:

March 31, 2011 year-end entry (assuming an increase in the liability):

Departments are reminded that the coding used to record actual severance benefits payable, at the end of year, remains unchanged. These accounting entries are described in the FIS Accounting Manual.

Financial Statement Presentation: The presentation in departmental financial statements of the severance benefits and the related liability should be in line with TBAS 1.2.