Accounting and Provision for long service leave requires estimation of when the leave will be taken, projected salary levels and the proportion of employees who will continue in the entity’s employment long enough to become entitled to long service leave.
It is necessary to estimate when employees will take long service leave, which may be any time after they become entitled. The estimation of the timing of when leave will be taken affects estimates of projected salaries and wages and the discounting of the defined benefit. The estimation of projected salary levels may be affected by inflation as well as promotion.
The likelihood of promotion may differ among different categories of employees, such as engineers, graduate trainees and unskilled workers. The proportion of employees who will become entitled to long service leave may vary from one location to another, and is usually considered to be increasing with the period of past employment.
Employees who are approaching entitlement are less likely to leave before their long service leave vests, as the loss of long service leave entitlement would be viewed as a cost of changing employment.
Dear Audience, Provision for long service leave should be made properly.