No sorry but you're wrong on both. The point is that it's a recruiting/culture tool. It doesn't really help the company from an accounting perspective. There absolutely is a liability and it needs to be recorded if it's material to the financial statements. If someone takes a day off work, they still get paid by the company even though they didn't produce any economic benefit on that day. It was theoretically earned through previous days, regardless or whether or not it was taken against a formally tracked bank of hours or not. The company needs to do a historical analysis to come up with a reasonable estimate for dollars taken per month/year and then when a day off is taken the debit is recorded against that liability. Again the credit is to cash, not the income statement, so it doesn't even touch the company's bottom line. To your second point, you must not understand the difference between "pay out" and "write down" and why paying out all that money at once is NOT advantageous to the company.