calculate basic earnings per share of entity e in its financial statements as at dec 613387

Accumulating paid absences

An entity has 100 employees, who are each entitled to five working days of paid sick leave for each year. Unused sick leave may be carried forward for one calendar year. Sick leave is taken first out of the current year’s entitlement and then out of any balance brought forward from the previous year (a LIFO basis). At 31 December 2013, the average unused entitlement is two days per employee. The entity expects, based on past experience which is expected to continue, that 92 employees will take no more than five days of paid sick leave in 2014 and that the remaining eight employees will take an average of six and a half days each.

The entity expects that it will pay an additional 12 days of sick pay as a result of the unused entitlement that has accumulated at 31 December 2013 (one and a half days each, for eight employees). Therefore, the entity recognises a liability equal to 12 days of sick pay.