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Glenn Hegar  ·  Texas Comptroller of Public Accounts

Reporting Requirements for Annual Financial Reports of State Agencies and Universities

Notes & Samples

NOTE 25 – Termination Benefits
Recognition and Disclosure Requirements

Recognize a liability and expense for voluntary termination benefits on the financial statements when the employee(s) accepts the offer and the amounts can be estimated (although this is not always the period in which the benefits are actually provided).

For involuntary termination benefits, recognize the liability and expense when the plan of termination is approved and communicated to the employee(s) and the amounts can be estimated.

Update measurements for both voluntary and involuntary termination benefit costs and recognize incremental liability and expenses (positive or negative) at the end of each subsequent fiscal year.

Make note disclosure of the termination benefits in the fiscal year the employer becomes obligated for the benefits and in any additional fiscal years in which the employee(s) is required to render future service to receive the involuntary termination benefits. This disclosure should provide a description of the benefit arrangement including:

  • Type of benefits provided
  • Number of employees affected
  • Period of time over which the benefits are expected to be provided

The cost of termination benefits should also be disclosed in the note in the year the employer becomes obligated for the benefits if that information is not otherwise identifiable on the face of the financial statements.

The effects of termination benefits on an employer’s defined benefit pension or OPEB obligations (for example, a change in the employer’s actuarial accrual liability for pension or OPEB benefits) should be accounted for and reported in accordance with guidelines for pensions and OPEB (GASB 45 and GASB 68 respectively) and disclosed in the notes to the financial statements.

Agencies paying COBRA benefits (ERS, University of Texas System and Texas A&M System) must include the following information in Note 25:

  • Number of participants
  • Premium revenue
  • 2 percent administrative fee revenue
  • Total revenue for COBRA
  • Claims paid
  • Cost to state
Glenn Hegar
Texas Comptroller of Public Accounts
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