When do you accrue / recognize expense associated with a signing bonus?
A company make an offer of employment which includes a signing bonus of $XX. The employee accepts the offer prior to year-end; however, the signing bonus is not payable until the employee begins employment which is in the month following year-end. There is a divided thinking amongst the accounting team. Certain believe that whereas the Company has a signed agreement and the amount is substantial, the amount is therefore probable to be paid and accordingly required to be accrued prior to year-end. Others believe that since the signing bonus is conditioned upon beginning employment, recognition is not required until such time the conditions have been met. All are in agreement that the expense is to be recognized ratably over the period to be earned (The employee will need to return the signing bonus if leaves prior to the 1st anniversary of employment.)