Severance

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Severance

A settlement received after being released from a corporation. In the context of corporate governance, an agreement that assures high-level executives of their postions or some compensation and are not contingent upon a change in control.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

Severance

A payment often (but not always) made in a lump sum that occurs when an employee is laid off or fired. Severance is sometime voluntary; that is, an employee may choose to quit and take a severance that is offered instead of staying and risking a layoff with no severance. The amount of severance is determined by the employee's length of time at the company, previous pay rate, and other factors. Accepting a severance makes one ineligible to collect unemployment insurance or to initiate a wrongful termination lawsuit. A severance exists in order to reduce the risk of the company when layoffs become necessary and to improve employee morale.
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References in periodicals archive ?
Our work extends the review of contractual termination benefits highlighted by The Australian Financial Review (58) by undertaking a more detailed analysis of the contractual provisions featured in that article.
94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit and Activity (including Certain Costs Incurred in a Restructuring)." Under Issue 94-3, certain costs associated with those activities were recognized as liabilities at a plan (commitment) date, which did not meet the definition of a liability in FASB Concepts Statement No.
Standards of Governmental Accounting and Financial Reporting/3-21 Scope and Applicability of This Statement/3-7 Measurement and Recognition of Termination Benefits/8-17 Measurement/9-11 Healthcare-Related Termination Benefits/9 Non-Healthcare-Related Termination Benefits/10-11 Recognition of Termination Benefit Liabilities and Expense in Accrual Basis Financial Statements/12-15 Recognition of Termination Benefit Liabilities and Expenditures in Modified Accrual Basis Financial Statements/16 Effects of a Termination Benefit on an Employer's Defined Benefit Pension or Other Postemployment Benefit Obligations/17
Smith 50 percent of his earned termination benefit of $1,200 per month ($600 per month).
SFAS 146 nullifies Emerging Issues Task Force (EITF) Issue 94-3, Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (Including Certain Costs Incurred in a Restructuring), which previously provided guidance in this area, and supersedes EITF 88-10, Costs Associated with Lease Modification or Termination.
The layoffs were expected to cost Extreme between $13 million and $15 million in employee-related termination benefits, but would save the firm some $40 million in operating costs.
They are terminated at will with no post termination benefits which is actually quite legal since the same is provided in their contracts.
1 Non-GAAP net income for the first quarter 2013 consists of GAAP net income of $519 million plus $49 million of amortization of intangibles related to the acquisition of HGST and $26 million related to employee termination benefits and other charges.
Restructuring charges include employee termination benefits, contract termination fees for the remaining lease payments on the Arizona office, net of potential sub-lease, and accelerated depreciation.
GAAP and IFRS closer together, significant differences still exist in the definition, recognition, and measurement of some termination benefits. For example, U.S.
Estillore added that the company should also ensure that the termination benefits would be given to employees, which should include half a month salary for every year of service, 13th month pay, unused leave pay and other perks or benefits.
The company expects to incur approximately $5.4 million of expense associated with employee termination benefits, which will also be recorded in 2Q12.