With the national unemployment rate remaining near double digits in May, companies terminating employees for any reason may want to brush up on the accounting requirements for any termination benefits they provide.

The accounting for a one-time termination benefit is described in Accounting Standards Codification Topic 420; however, the requirements around a contractual termination benefit, special benefit, or other post-employment benefit is found elsewhere, in ASC Topic 712, according to a recent alert from PricewaterhouseCoopers.

The accounting is based on factors such as whether the employer has a substantive plan for providing benefits, whether the employer has a written contract with the terminated employee, the reason for the termination and whether that’s addressed in any plan or agreement, and whether the benefit is a one-time event.

The alert provides a kind of roadmap for analyzing a particular fact pattern and determining which accounting is most appropriate. It works through the scope of the termination benefits and when a company should record a liability or an expense based on the various bits of accounting guidance. The alert also walks through some practical examples, helping explain how the various circumstances at play would trigger each of the different accounting requirements.

As with so much in accounting and finance these days, the lines can get a little blurry between some of the termination benefits companies may offer, leading to some questions around which guidance to follow, says the PwC alert. As an example, a company may have a substantive plan or a history for how it routinely compensates employees upon termination, yet management may choose in given instances to provide an additional one-time benefit.