What Governments Need to Know About GASB 103

The Governmental Accounting Standards Board (GASB) released Statement No. 103 – Financial Reporting Model Improvements in April 2024. This long-awaited update modernizes key portions of GASB 34, which has guided governmental reporting since 1999.

The changes aim to make financial statements more understandable and decision-useful—not just for financial professionals, but for a wider range of users who rely on this information to assess accountability and performance.

Effective Date: Fiscal years beginning after June 15, 2025.

What’s Changing Under GASB 103?

Of the numerous main key components of financial reporting that were discussed, the following components survived to the final issuance of GASB Statement No. 103:

  • 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 basic financial statements
  • budgetary comparison information

Management’s Discussion and Analysis (MD&A)

Various changes were implemented within the MD&A. The Board added clarifying language regarding the following topics:

  • the MD&A should be written in a manner that can be understood by all users, not just those who have a detailed knowledge or governmental accounting.
  • analysis provided throughout the MD&A should include more information about why there were significant changes from the current year compared to the prior year, not just simply stating which numbers changed.
  • the information included in the MD&A should strive not to be repetitive.
  • both governmental and business-type activities should be discussed within the MD&A.
  • budgetary comparisons are no longer required to be included in MD&A; these comparison schedules are included as RSI instead.
  • multiple examples of types of information to include in “currently known facts, decisions or conditions” were provided by the Board.

Unusual or Infrequent Items

GASB Statement 34 defined “extraordinary items” as transactions that are both unusual in nature and infrequent in occurrence and defined “special items” as transactions that are within the control of management and that are either unusual or infrequent in occurrence. Extraordinary items and special items were required to be disclosed separately. Governments found it challenging to make the distinction between extraordinary and special items. As a result of this feedback, the Board concluded that all unusual and infrequent items should be presented separately, regardless of whether the item was within control of management. The details of the unusual or infrequent items should be disclosed in the notes to the financial statements.

Presentation of the Proprietary Fund Statement of Revenues, Expenses and Changes in Fund Net Position

Previous guidance allowed each entity to define operating and nonoperating revenues and expenses. The Board has now provided those definitions as follows:

  • nonoperating revenues and expenses: 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: revenues and expenses other than nonoperating revenues and expenses

The standard requires operating and nonoperating revenues and expenses to be presented separately, as well as separately reporting noncapital subsidies, which is a type of nonoperating revenues and expenses. The Board has provided an all-inclusive format illustration within the standard for governments to follow.

Information About Major Component Units in Basic Financial Statements

Each major component unit should be reported separately in the government’s basic financial statements, if it does not reduce the readability of the statements. However, if the government has many major component units and including each of them separately reduces the readability of the basic financial statements, the government should instead include a combining statement of major component units after the fund financial statements and disclose the combined major component unit totals on the basic financial statements.

Budgetary Comparison Information

Budgetary comparison schedules are required to be presented for the general fund and each major special revenue fund with a legally adopted budget. While previously optional, the issuance of GASB 103 now requires separate columns depicting the variance between the original budget and final budget and the variance between the final budget and actual results. For significant variances in either of these columns, additional explanation is required to be presented in the notes to the RSI.

What Should You Do Now?

Governments should begin preparing for GASB 103 well before the effective date. Key steps include:

  • Updating internal policies for MD&A content and proprietary fund classification
  • Reviewing software or templates used to compile statements
  • Educating finance staff and boards about the new expectations
  • Starting early conversations with auditors or consultants

The standard includes appendices with examples and templates to guide implementation.

If you’re unsure how these changes will impact your reporting process, contact an Adams Brown advisor. We can walk you through the new requirements, help you assess your readiness and make sure you’re set up for a smooth transition.

Access the complete standard including appendices here.