Contributor:
Jennifer Moran | Senior Manager
More than 20 years after issuing Statement No. 34, Basic Financial Statements—and Management’s Discussion and Analysis—for State and Local Governments, which launched a new financial reporting model that changed the landscape of governmental accounting and financial reporting in the early 2000s, the Governmental Accounting Standards Board (GASB) has undertaken efforts to improve key components in the financial reporting model, resulting in a new standard, GASB Statement No. 103, Financial Reporting Model Improvements (GASB 103). The requirements of GASB 103 are effective for fiscal years beginning after June 15, 2025.
GASB 103 focuses on improvements in the following areas:
- Management’s discussion and analysis (MD&A)
- Unusual or infrequent items
- Presentation of proprietary fund statement of revenues, expenses and changes in fund net position
- Major component unit information
- Budgetary comparison information
- Financial trends information in the statistical section
Management’s Discussion and Analysis (MD&A)
Governments should continue to present MD&A as required supplementary information preceding the basic financial statements in the following already-familiar categories: (1) overview of the financial statements, (2) financial summary, (3) detailed analyses, (4) significant capital asset and long-term financing activity, and (5) currently known facts, decisions, or conditions. GASB 103 stresses that the detailed analyses section should provide explanations of why balances and results changed rather than simply presenting the amounts of those changes.
Unusual or Infrequent Items
Unusual or infrequent items should be presented separately as the last flow(s) of resources prior to the net change in resource flows in the government-wide, governmental fund, and proprietary fund statements of resource flows and should not be netted when there are multiple such items. Governments should disclose the program, function, or identifiable activity to which an unusual or infrequent item is related and whether it is within the control of management.
Presentation of Proprietary Fund Statement of Revenues, Expenses and Changes in Fund Net Position
Operating and nonoperating revenues and expenses and noncapital subsidies are clarified and the order in which such information, in addition to unusual or infrequent items, if applicable, should be presented in the basic financial statements is prescribed.
Major Component Unit Information
Each major component unit should be presented separately in the statements of net position and activities, except in situations where it would reduce the readability of the statements, in which case combining statements of major component units should be included in the basic financial statements following the fund financial statements.
Budgetary Comparison Information
Budgetary comparison schedules should be presented as required supplementary information for the general fund and each major special revenue fund that has a legally adopted annual budget. GASB 103 has eliminated the option to present the budgetary comparison as a basic financial statement. Variance columns between (1) original and final budget amounts and (2) final budget amounts and actual results are required to be presented. 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.
Financial Trends Information in the Statistical Section
In the statistical section for governments 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, noncapital subsidy, and other nonoperating revenues and expenses.
Other Information
While the governmental funds were initially included in this undertaking, GASB decided to remove issues related to the reporting of governmental funds from this project’s scope. It is not known at this time when the efforts to address improving and enhancing the governmental funds reporting model will resume.
Your Guide Forward for GASB 103
Cherry Bekaert has developed a GASB roadmap checklist that helps track GASB’s assumed level of effort, industry impact, and government available resources to adequately prepare for all upcoming GASB pronouncements and other significant federal and state regulatory issues. For a GASB roadmap of your own, please reach out to our GASB-as-a-Service professionals.
