# ASC 710-10-25: Compensation—General — Overall — 25 Recognition Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/710/10/#25-recognition) Study and research edition. Verify current requirements with the official source. Summaries, enrichment, and tags are machine-generated study aids. Paragraph html preserves source markup; snippet is abbreviated. Pending content is not necessarily effective. Tables and mathematical or amendment markup are retained as HTML where Markdown would lose structure. Source downloaded (UTC): 2026-09-10T00:57:22.456Z to 2026-09-10T00:57:22.456Z Record version: sha256:326ad34153f76e0f201bafef89b020c36e6f53580f98fa9f1132126f9e775d32 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 710-10-25: 25 Recognition [Read section](https://asc.understandingaccounting.org/asc/710/10/#25-recognition) SEC content: no #### Compensated Absences ##### [710-10-25-1](https://asc.understandingaccounting.org/asc/710/10/#710-10-25-1) Pending content: no Source downloaded (UTC): 2026-09-10T00:57:22.456Z to 2026-09-10T00:57:22.456Z Record version: sha256:23a2a76993a67b242251ca3f5cccedeb66f421eb3f82456c4ae3b9b09b29659c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An employer shall accrue a liability for employees' compensation for future absences if all of the following conditions are met: 1. a The employer's obligation relating to employees' rights to receive compensation for future absences is attributable to employees' services already rendered. 2. b The obligation relates to rights that vest or accumulate. Vested rights are those for which the employer has an obligation to make payment even if an employee terminates; thus, they are not contingent on an employee's future service. Accumulate means that earned but unused rights to [compensated absences](https://asc.understandingaccounting.org/glossary/c/#compensated-absences "Employee absences, such as vacation, illness, and holidays, for which it is expected that employees will be paid.") may be carried forward to one or more periods subsequent to that in which they are earned, even though there may be a limit to the amount that can be carried forward. 3. c Payment of the compensation is probable. 4. d The amount can be reasonably estimated. ##### [710-10-25-2](https://asc.understandingaccounting.org/asc/710/10/#710-10-25-2) Pending content: no Source downloaded (UTC): 2026-09-10T00:57:22.456Z to 2026-09-10T00:57:22.456Z Record version: sha256:e82bd0d88fd6d1dd7341ba6f51fd7c23fa92ae72f5d022666b2cfd2bc9ad9607 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A liability for amounts to be paid as a result of employees' rights to compensated absences shall be accrued, considering anticipated forfeitures, in the year in which earned. For example, if new employees receive vested rights to two-weeks' paid vacation at the beginning of their second year of employment with no pro rata payment in the event of termination during the first year, the two-weeks' vacation shall be considered to be earned by work performed in the first year and an accrual for vacation pay shall be required for new employees during their first year of service, allowing for estimated forfeitures due to turnover. Furthermore, the definition of a liability does not limit an employer's liability for compensated absences solely to rights to compensation for those absences that eventually vest. The definition also encompasses a constructive obligation for reasonably estimable compensation for past services that, based on the employer's past practices, probably shall be paid and can be reasonably estimated. ##### [710-10-25-3](https://asc.understandingaccounting.org/asc/710/10/#710-10-25-3) Pending content: no Source downloaded (UTC): 2026-09-10T00:57:22.456Z to 2026-09-10T00:57:22.456Z Record version: sha256:03dd06ed2d1869f141ac2c284fc07b2a4fd736829b544c159cae665969d2bebd Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Individual facts and circumstances must be considered in determining when nonvesting rights to compensated absences are earned by services rendered. The requirement to accrue a liability for nonvesting rights to compensated absences depends on whether the unused rights expire at the end of the year in which earned or accumulate and are carried forward to succeeding years, thereby increasing the benefits that would otherwise be available in those later years. If the rights expire, a liability for future absences shall not be accrued at year-end because the benefits to be paid in subsequent years would not be attributable to employee services rendered in prior years. (Jury duty and military leave benefits generally do not accumulate if unused and, unless they accumulate, a liability for those benefits shall not be accrued at year-end.) On the other hand, if unused rights do accumulate and increase the benefits otherwise available in subsequent years, a liability shall be accrued at year-end to the extent that it is probable that employees will be paid in subsequent years for the increased benefits attributable to the accumulated rights and the amount can be reasonably estimated. ##### [710-10-25-4](https://asc.understandingaccounting.org/asc/710/10/#710-10-25-4) Pending content: no Source downloaded (UTC): 2026-09-10T00:57:22.456Z to 2026-09-10T00:57:22.456Z Record version: sha256:4d4673d60276c036a8e18c5390357844a3caa8ffb43cff9b4f76f4d5b53c98b9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The appropriate accounting for a [sabbatical leave](https://asc.understandingaccounting.org/glossary/s/#sabbatical-leave "A benefit in the form of a compensated absence whereby the employee is entitled to paid time off after working for an entity for a specified period of time. During the sabbatical, the individual continues to be a compensated employee and is not required to perform any duties for the entity.") depends on the purpose of the leave. If a sabbatical leave is granted only to perform research or public service to enhance the reputation of or otherwise benefit the employer, the compensation is not attributable to services already rendered (see paragraph [710-10-25-1(a)](https://asc.understandingaccounting.org/asc/710/10/#710-10-25-1)); a liability shall not be accrued in advance of the employee's services during such leave. If the leave is granted to provide compensated unrestricted time off for past service and the other conditions for accrual are met, a liability for sabbatical leave shall be accrued. ##### [710-10-25-5](https://asc.understandingaccounting.org/asc/710/10/#710-10-25-5) Pending content: no Source downloaded (UTC): 2026-09-10T00:57:22.456Z to 2026-09-10T00:57:22.456Z Record version: sha256:e7ad3aebf1813a128cd8cff2ffc939fbb2be43665971b83b901b377b07de765e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An employee's right to a compensated absence under a sabbatical or other similar benefit arrangement that requires the completion of a minimum service period and in which the benefit does not increase with additional years of service accumulates pursuant to paragraph [710-10-25-1(b)](https://asc.understandingaccounting.org/asc/710/10/#710-10-25-1) for arrangements in which the individual continues to be a compensated employee and is not required to perform any direct or indirect services for or on behalf of the entity during the absence. Therefore, assuming all of the other conditions of paragraph [710-10-25-1](https://asc.understandingaccounting.org/asc/710/10/#710-10-25-1) are met, the compensation cost associated with a sabbatical or other similar benefit arrangement shall be accrued over the requisite service period. ##### [710-10-25-6](https://asc.understandingaccounting.org/asc/710/10/#710-10-25-6) Pending content: no Source downloaded (UTC): 2026-09-10T00:57:22.456Z to 2026-09-10T00:57:22.456Z Record version: sha256:c28b12c6b6419b13655d2ecc24bc0c0d720a392da1dddc00adfccae83cae97d8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The employer's actual administration of sick pay benefits shall determine the appropriate accounting. In accounting for compensated absences, the form of an employer's policy for compensated absences shall not prevail over actual practices. For example, if employees are customarily paid sick pay benefits even though their absences from work are not actually the result of illness or if employees are routinely allowed to take compensated terminal leave for accumulated unused sick pay benefits prior to retirement, such benefits shall not be considered sick pay benefits for purposes of applying the provisions of the following paragraph but rather shall be accounted for in accordance with paragraph [710-10-25-1](https://asc.understandingaccounting.org/asc/710/10/#710-10-25-1). ##### [710-10-25-7](https://asc.understandingaccounting.org/asc/710/10/#710-10-25-7) Pending content: no Source downloaded (UTC): 2026-09-10T00:57:22.456Z to 2026-09-10T00:57:22.456Z Record version: sha256:e21dae702ced5a41de2abd4dfbbc733c33fe2f85688494e2fa7532453613b81a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Notwithstanding the conditions specified in paragraph [710-10-25-1](https://asc.understandingaccounting.org/asc/710/10/#710-10-25-1), an employer is not required to accrue a liability for nonvesting accumulating rights to receive sick pay benefits (that is, compensation for an employee's absence due to illness). ##### [710-10-25-8](https://asc.understandingaccounting.org/asc/710/10/#710-10-25-8) Pending content: no Source downloaded (UTC): 2026-09-10T00:57:22.456Z to 2026-09-10T00:57:22.456Z Record version: sha256:64a0f4cfc2ee43cb3422483de3d4a956e6737c26deadefb1327c2386638e3605 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic does not prohibit an employer from accruing a liability for such nonvesting accumulating sick pay benefits, providing the criteria of paragraph [710-10-25-1](https://asc.understandingaccounting.org/asc/710/10/#710-10-25-1) are met. #### Deferred Compensation Arrangements ##### [710-10-25-9](https://asc.understandingaccounting.org/asc/710/10/#710-10-25-9) Pending content: no Source downloaded (UTC): 2026-09-10T00:57:22.456Z to 2026-09-10T00:57:22.456Z Record version: sha256:461e90490b16ff8951ed2ad6c176f12bf3db9d7f3ff56e0fd1479dec936e09b2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. To the extent the terms of a contract attribute all or a portion of the expected future benefits to an individual year of the employee's service, the cost of those benefits shall be recognized in that year. To the extent the terms of the contract attribute all or a portion of the expected future benefits to a period of service greater than one year, the cost of those benefits shall be accrued over that period of the employee's service in a systematic and rational manner. ##### [710-10-25-10](https://asc.understandingaccounting.org/asc/710/10/#710-10-25-10) Pending content: no Source downloaded (UTC): 2026-09-10T00:57:22.456Z to 2026-09-10T00:57:22.456Z Record version: sha256:2646384fcbc13776e0434ea0ebae0ce2008e30c21bcddb773cb128db04de094b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If elements of both current and future services are present, only the portion applicable to the current services shall be accrued. Example 1 (see paragraph [710-10-55-1](https://asc.understandingaccounting.org/asc/710/10/#710-10-55-1)) illustrates this guidance. ##### [710-10-25-11](https://asc.understandingaccounting.org/asc/710/10/#710-10-25-11) Pending content: no Source downloaded (UTC): 2026-09-10T00:57:22.456Z to 2026-09-10T00:57:22.456Z Record version: sha256:fd27eb271de031e42c440e5ce687de13ad877fc6474bfe6024e4fb03fd1d952c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Some deferred compensation contracts provide for periodic payments to employees or their surviving spouses for life with provisions for a minimum lump-sum settlement in the event of the early death of one or all of the beneficiaries. The estimated amount (see paragraph [710-10-30-1](https://asc.understandingaccounting.org/asc/710/10/#710-10-30-1)) of future payments to be made under such contracts shall be accrued over the period of active employment from the time the contract is entered into. Example 2 (see paragraph [710-10-55-4](https://asc.understandingaccounting.org/asc/710/10/#710-10-55-4)) illustrates this guidance. #### Lump-Sum Payments Under Union Contracts ##### [710-10-25-12](https://asc.understandingaccounting.org/asc/710/10/#710-10-25-12) Pending content: no Source downloaded (UTC): 2026-09-10T00:57:22.456Z to 2026-09-10T00:57:22.456Z Record version: sha256:9ae0de6a36927d76e603f79997df9b8796dfe09997b2ea7f7b18ac88bb2fb4f5 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In connection with the signing of new union contracts, union employees may agree to accept a lump-sum cash payment or payments in lieu of all or a portion of an increase in their base wage rate. Entities believe that in certain circumstances those lump-sum payments reduce or eliminate increases in base wage rates during the contract period that would otherwise be required. The specific terms of lump-sum payments vary, but ordinarily there is no requirement that the employee refund to the entity any portion of the payment if the employee terminates employment prior to the end of the contract period. Unlike an employment contract with an individual, the union contract applies to the work force, and there is a presumption that an employee who terminates generally will be replaced by another union member at the same base wage rate without an additional lump-sum payment. ##### [710-10-25-13](https://asc.understandingaccounting.org/asc/710/10/#710-10-25-13) Pending content: no Source downloaded (UTC): 2026-09-10T00:57:22.456Z to 2026-09-10T00:57:22.456Z Record version: sha256:0c0d5468282e6b4a75aaa9ff3bf211ca01401bfba3d33ef37a8c9e99b006bb31 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. All or a portion of a lump-sum payment may be deferred and appropriately amortized only when it is clear that the payment will benefit a future period in the form of a lower base wage rate than otherwise would have existed. The period of amortization shall not extend beyond the contract period. The terms and conditions of those payments may vary and the facts and circumstances surrounding the contract and the negotiations must be reviewed to determine how to account for the payment. ##### [710-10-25-14](https://asc.understandingaccounting.org/asc/710/10/#710-10-25-14) Pending content: no Source downloaded (UTC): 2026-09-10T00:57:22.456Z to 2026-09-10T00:57:22.456Z Record version: sha256:8ec1b4d2dd07587039f5e7e4dfe9a46ce6001efaea7522229bcf9c7df95a254f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This guidance relates solely to union contracts and not to individual employment contracts or any other situation involving compensation payments to individual employees. ### Deferred Compensation—Rabbi Trusts ##### [710-10-25-15](https://asc.understandingaccounting.org/asc/710/10/#710-10-25-15) Pending content: no Source downloaded (UTC): 2026-09-10T00:57:22.456Z to 2026-09-10T00:57:22.456Z Record version: sha256:8ad8ef7058fbed327286704be4b94bae8ca86318ad2b3fde8af97d128d057a83 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following are the four types of deferred compensation arrangements involving [rabbi trusts](https://asc.understandingaccounting.org/glossary/r/#rabbi-trusts "Rabbi trusts are grantor trusts generally set up to fund compensation for a select group of management or highly paid executives. To qualify as a rabbi trust for income tax purposes, the terms of the trust agreement must explicitly state that the assets of the trust are available to satisfy the claims of general creditors in the event of bankruptcy of the employer.") covered by this Subsection: 1. a Plan A—The plan does not permit diversification and must be settled by the delivery of a fixed number of shares of employer stock. 2. b Plan B—The plan does not permit diversification and may be settled by the delivery of cash or shares of employer stock. 3. c Plan C—The plan permits diversification; however, the employee has not diversified (the plan may be settled in cash, shares of employer stock, or diversified assets). 4. d Plan D—The plan permits diversification and the employee has diversified (the plan may be settled in cash, shares of employer stock, or diversified assets). #### Plan A ##### [710-10-25-16](https://asc.understandingaccounting.org/asc/710/10/#710-10-25-16) Pending content: no Source downloaded (UTC): 2026-09-10T00:57:22.456Z to 2026-09-10T00:57:22.456Z Record version: sha256:18b87a5b85e3dbc713f7343d544c18b5540295b7369b7a71e279ca3dcb3d46af Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For Plan A, employer stock held by the rabbi trust shall be classified in equity in a manner similar to the manner in which treasury stock (see Subtopic 505-30) is accounted for. The deferred compensation obligation shall be classified as an equity instrument. #### Plans B and C ##### [710-10-25-17](https://asc.understandingaccounting.org/asc/710/10/#710-10-25-17) Pending content: no Source downloaded (UTC): 2026-09-10T00:57:22.456Z to 2026-09-10T00:57:22.456Z Record version: sha256:f6db4c37963a3a345dc2d6537555e55a6ff1743f301794e89ceb212be63128b0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For Plans B and C, employer stock held by the rabbi trust shall be classified in equity in a manner similar to the manner in which treasury stock (see Subtopic 505-30) is accounted for. The deferred compensation obligation shall be classified as a liability. #### Plan D ##### [710-10-25-18](https://asc.understandingaccounting.org/asc/710/10/#710-10-25-18) Pending content: no Source downloaded (UTC): 2026-09-10T00:57:22.456Z to 2026-09-10T00:57:22.456Z Record version: sha256:2155a4b1e189402f90ba1bb717a2be54964a7786c153bac9e1e0e2ca5c6f7f54 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For Plan D, assets held by the rabbi trust shall be accounted for in accordance with generally accepted accounting principles (GAAP) for the particular asset (for example, if the diversified asset is an equity security, that security would be accounted for in accordance with Subtopic 321-10). The deferred compensation obligation shall be classified as a liability. At acquisition, debt securities held by the rabbi trust may be classified as trading.