Question

A school district prepares its budget on a cash basis. It is contemplating the changes or actions that follow. For each, indicate the impact that the change would have (1) on year-ending June 30, 2017 general fund expenditures or transfers and (2) on year ending June 30, 2017, government -wide expenses (e.g., “increase expenditures by $x” or “no impact”). Provide a brief explanation of your response, indicating that you are aware of the relevant financial reporting issue. 3. The district increased the number of sick days to which employees are entitled to take, thereby increasing the cost of sick days that employees earned in 2017 but will take in future years by 150,000. The sick leave can be taken only as employees are sick; it cannot be paid for as termination benefit.

Answer 1

The district increased the number of sick days to which employees are entitled to take, thereby increasing the cost of sick days that employees earned in 2017 but will take in future years by 150,000.

As the case clearly states that the payment is made in the future years that is on cash basis and hence it will not have any impact on the current budget ending June 30, 2017. Therefore there wouldnot be any changes to be made in the budget because of this change of action.