Cates Computing Systems develops and markets commercial software for personal computers and workstations. Three situations involving compensation for possible future absences of Cates's employees are described below.
a. Cates compensates employees at their regular pay rate for time absent for military leave, maternity leave, and jury time. Employees are allowed predetermined absence periods for each type of absence.
b. Members of the new product development team are eligible for three months' paid sabbatical leave every four years. Five members of the team have just completed their fourth year of participation.
c. Company policy permits employees four paid sick days each year. Unused sick days can accumulate and can be carried forward to future years.
Required:
1. What are the conditions that require accrual of an expense and related liability for employees' compensation for future absences?
2. For each of the three situations, indicate the circumstances under which accrual of an expense and related liability is warranted.