UK Annual holiday pay accrual at year end - first time done this


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hello all, hope everybody is well.
Our year end date is 31/3.
Salaries pay rises commence 1st april each year.
we introduced a new holiday scheme for staff so that they all start 1/4 - 31/3 .
staff can carry forward a maximum of 5 days holiday.
my query is , if i need to include an accrual in the accounts for 21/22 (1/4/21-31/3/22 accounts) , which salary do i use in my calculation ?

is it current salary 1/4/21-31/3/22 , or, do i use the new salaries from 1/4/22 ? or should i contact our auditors to ask ?

thank you for help
jay
 
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kirby

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Use the salary as of 31/3/22. The 31/3/22 salary amounts are the basis for what you owe in holiday accrual as of 31/3/22.
 
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interestingly the auditors have advised i use the 22/23 salaries (new sals from 1/4/22) as that was what would owe if anybody retired mid year
 

kirby

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No. Each month you will adjust your accrual based on what is now owed, which will be based on the new salaries - when the salaries increase, if they do.

Your liability at 31/3/22 has to be based on what you owe on balance sheet date.

Hey, if they are allowing you to record today what lies in the future then maybe you can also accrue income today from future sales?! Same logic as theirs.
 
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Bizarre
Can hardly tell the auditors they are wrong ?

it also impacts the P&L ,salary costs and NI
 

kirby

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So somehow, your auditors see in the future: who will remain on staff, who will get what increase %, who will take holiday before and after a salary increase, etc.
In such case, ask them for stock picks that will increase in value in the future.

Or, what if no salary increases for next fiscal are planned nor even approved by mgmt right now? Then it seems the auditors would have to accept the rate existing at year end.

I’m sorry you are burdened with auditors who have poor acctg knowledge. I’ve seen that countless times. I understand if your path is just to give in to them. But it is not the correct path …

For everyone else, this is the danger of asking an acctg question to your auditor. Problem arises when they give you a goofy answer. Their ego will usually not let them back down from that answer. And now you are stuck.
 
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They know (I know ) the 22/23 salaries as they get decided by the board in February and I will know this week how many days hol to cfwd for each staff (these will be the days to accrue )
Audit doesn’t start until June
 

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