Blog: On the Horizon – GASB Statement No. 103
In 1999, the Government Accounting Standards Board (“GASB”) issued Statement No. 34, Basic Financial Statements – and Management’s Discussion and Analysis – for State and Local Governments. That statement has been one of the most significant and impactful GASB statements since the establishment of the GASB in the 1980s. In April 2024, the GASB issued the first statement to supersede GASB Statement No. 34 since its issuance. GASB Statement No. 103, Financial Reporting Model Improvements was created and issued with the goal of improving key components in financial reporting in an effort to enhance consistency and transparency for decision makers and users of the financial statements.
GASB Statement No. 103 (hereafter referred to as the “Statement”) is applicable for periods beginning after June 15, 2025, with earlier adoption encouraged. For many governmental entities, the period of adoption will be the fiscal year ended June 30, 2026, which provides ample time to plan for any material changes.
The Statement establishes new requirements or modifies existing requirements in the following areas:
- Management’s discussion and analysis (“MD&A”)
- Unusual or infrequent items
- Presentation of the proprietary fund statement of revenues, expenses, and changes in fund net position
- Information about major component units in the basic financial statements
- Budgetary comparison information
- Financial trends information in the statistical section
Management’s Discussion and Analysis
The MD&A section continues to be required supplementary information (“RSI”) preceding the basic financial statements with the following required sections: overview of the financial statements; financial summary; detailed analysis; significant capital asset and long-term financing activity; and currently known facts, decision, or conditions. However, the focus of the Statement is to bolster the MD&A’s “story-telling,” by stressing that the detailed analysis should qualitatively explain why balances and the results of operations changed rather than simply presenting quantitatively. In addition, the Statement advises that unnecessary duplication and generalities be avoided and only the most relevant information be presented. The Statement further aims to distinguish between the primary government and any discretely presented component units with a focus on the primary government within the MD&A.
Unusual or Infrequent Items
The Statement requires government entities to present unusual or infrequent items as the last presented flow(s) of resources prior to the net change in resource flows in the government-wide, governmental funds, and proprietary fund statements. The items should also be presented separately and not netted if there are multiple items. Lastly, entities should add a footnote disclosure detailing the item(s), the program, function, or identifiable activity to which the item(s) relate, and whether the item is within management’s control.
Presentation of the Proprietary Fund Statement of Revenues, Expenses, and Changes in Fund Net Position
The Statement provides clear definitions of nonoperating revenues and expenses as follows: subsidies received and provided; contributions to permanent and term endowments; revenues and expenses related to financing; resources from the disposal of capital assets and inventory; and investment income and expenses. Operating revenues and expenses include all other items not defined as nonoperating.
The Statement also requires the Statement of Revenues, Expenses, and Changes in Fund Net Position of the Proprietary Fund to be presented in a prescribed order, using an all-inclusive format.
Major Component Unit Information
The Statement requires governmental entities to present each major component unit separately in the Statements of Net Position and Activities if such presentation does not reduce the readability of the financial statements. If readability is reduced, combining statements of major component units should be included in the basic financial statements after the fund financial statements.
Budgetary Comparison Information
Budgetary comparison schedules should be presented as RSI for the general fund and each major special revenue fund that has a legally adopted budget. The schedule is required to present both variances between the original and final budget amounts and variances between the final budget and actual amounts. Any significant variances are required to be described within notes to the RSI.
Financial Trends Information in the Statistical Section
In the statistical section for government entities that are engaged in only business-type activities or only business-type and fiduciary activities, revenues should be presented by major source, and distinguish between operating, non-capital subsidy, and other nonoperating revenues and expenses.
As there have been minimal changes to the financial reporting model in almost 25 years, this particular standard marks a major reporting change and organizations should familiarize themselves with the financial reporting requirements. Management should consult with their accounting professionals about the financial statement reporting requirements of the new GASB Statement No. 103. At HFCO, we have a team of professionals specializing in audits of governmental nonprofit organizations, including charter school, Yellow Book Audits, and Single Audits that can help your organization understand and meet your financial statement reporting requirements.
Reach out to our nonprofit audit department contact, Cristopher Sefransky, CPA, CFE, LSSGB, Audit and Assurance manager, with any questions.
About the Author: Cristopher Sefransky has over seventeen years of diverse public accounting experience with national and regional CPA firms rendering accounting and assurance, consulting, and tax services to clientele. Industry exposure includes private and public for-profit entities and nonprofit entities in industries including charter schools, private schools, HUD entities, manufacturing and distribution, and various service industries.