Because of the matching principle, compensation expense should be increased by the (accrued) salary expense for the last week of 2007 and the liability for the bonuses was incurred in 2007. Thus, total compensation expense for 2007 is $98.5 million ($90 million unadjusted compensation expense + $3.5 million salary accrual + $5 million bonus accrual). Since the salaries and bonuses were not paid in 2007, accrued liabilities would increase by $8.5 million. An increase in accrued liabilities, a current liability, would decrease the current ratio. |
