GASB Statement No. 103: Financial Reporting Model Improvements

The Governmental Accounting Standards Board (GASB) issued Statement No. 103: Financial Reporting Model Improvements to provide updated guidance on several areas of the financial reporting model. It is the most significant update to the financial reporting model since GASB Statement No. 34: Basic Financial Statements and Management’s Discussion and Analysis for State and Local Governments was issued approximately twenty-five years ago.

The requirements of GASB Statement No. 103 are effective for fiscal years beginning after June 15, 2025, and all reporting periods thereafter. Earlier application is encouraged. Application of this statement should be made retroactively by restating prior periods unless it is impractical.

The areas most affected by GASB 103 are:

Much of the MD&A requirements remain similar prior to the issuance of the GASB 103. GASB has only provided general requirements for the MD&A since it is specific and unique to each government. The general requirements consist of the following:

The objective of the clarifications to the MD&A is to reduce the boilerplate information, increase the focus on explanations of the reasons for changes from year to year, reduce repetition within the MD&A, and explain the requirements related to currently known facts, decisions or conditions.

An emphasis is made to describe the actions that the government has taken related to postemployment benefit liabilities, capital asset improvement plans, leases and subscription-based information technology arrangements liabilities and private-public partnerships. Financial reporting for many of these areas did not exist when GASB 34 was issued. 

Unusual or infrequent items should be presented as the last presented flow of resources prior to the net change in resources, and a disclosure should be made that provides details related to the underlying event that caused the unusual or infrequent item. Flood damage is an example of an unusual or infrequent event that is described in GASB 103.

The guidance for operating and non-operating revenues and expenses has been clarified to promote consistency among governments. Non-operating revenues consist of subsidies received and provided, contributions to endowments, and revenues and expenses related to financing, disposal of capital assets and investment activity. Activity that is not non-operating is considered operating. The exception to the non-operating classification described in the pronouncement is if the non- operating activity is the government’s principal operations. For example, interest revenue for a government providing loans to first-time homebuyers would be reported as an operating activity.

Subsidies have a separate section in the Statement of Revenues, Expenses, and Changes in Fund Net Balance below operating income (loss). A subsidy consists of resources received or provided from/to another party or fund for which the proprietary fund does not provide goods or services to the other party or fund and that directly or indirectly keep the proprietary fund’s fees and charges lower than they would be otherwise. Other non-capital transfers can also be considered subsidies. An example of a subsidy is an appropriation that a local government received from the state.

Major component units should be presented separately in the statements of net position and activity unless it affects the readability of the financial statements. Combining financial statements of major component units can be presented in which the readability of the financial statements is affected. Before the issuance of GASB 103, governments had the option to show condensed information for combining component units in the notes to the financial statements.

Budgetary comparison schedules should be presented as required supplementary information for the general fund and each major special revenue fund. Separate columns should be presented for the variances between the original and final budgets and financial budgets and actual results. An explanation of significant variations between original and final budget amounts and final budget amounts and actual results is required to be included in the notes to the required supplementary information.

Governments engaged in either only business-type activities or only business-type activities and fiduciary activities should present revenues by major sources for operating and non-operating revenues.