Which statement is FALSE regarding an employer's liability for compensated absences?

The statement about unused sick leave being included in the liability for compensated absences is considered false. In governmental accounting, the treatment of sick leave can vary based on specific policies established by the employer. Typically, if sick leave is not vested or does not carry over to future periods in a manner that employees can reasonably expect to receive payment for unused sick leave upon separation, it would not be recognized as a liability.

In contrast, the other statements accurately reflect standard accounting practices regarding compensated absences. Employers usually value liabilities for compensated absences using current salary rates to reflect the true cost of these liabilities at the time they may be realized. Salary-related payments, such as payroll taxes or benefits, are also included in the calculation of the liability to ensure a comprehensive understanding of the total cost associated with compensated absences. Additionally, sabbaticals may be included in the liability if an organization has policies that grant employees the right to take an extended leave with compensation, thus necessitating the accounting for this potential obligation.