Which statement is TRUE regarding employers and on-behalf benefit payments?

The correct answer indicates that neither of the provided statements about employers and on-behalf benefit payments is true.

Evaluating the first statement, it suggests that on-behalf payments should be recognized only if the employer is legally obligated. However, on-behalf payments often arise from governmental or other public-sector commitments and may not strictly depend on the employer's legal obligation. Therefore, the recognition can occur in broader circumstances than just legal obligations.

The second statement asserts that the recognized amount for on-behalf payments should only include amounts received by the third party. In practice, the recognition of on-behalf payments is typically broader, reflecting the entire value of the benefit that is provided to employees, rather than being limited to just the amounts received by the third party.

Understanding on-behalf payments is vital in governmental accounting because it often reflects contributions made by one entity on behalf of another, and all associated benefits or costs should be accounted for in the financial statements for a complete picture of the organization's financial obligations.