Are You Ready to Implement the New GASB 103: Financial Reporting Model Improvements?

At its April 2024 meeting, the Governmental Accounting Standards Board (GASB) approved the issuance of GASB 103, Financial Reporting Model Improvement, after more than a decade of review. The Board removed the topic of Governmental Funds, meaning that there will be no change to the governmental fund presentation. This was the biggest change from previous drafts.

This statement is expected to lead to more MD&A consistency, as well as consistency on budgetary schedules. It will go into effect for fiscal years beginning after June 15, 2025 (fiscal year 2026). This article summarizes the key elements of GASB 103.

MD&A

What changed:

• The discussion of significant variations between the original and final budget amounts and between the final budget amounts and actual results for the general fund should be presented as notes to budgetary comparison information, which will be presented as required supplementary information (RSI).

What did not change:

• Continue to present a brief discussion of the basic financial statements, including the relationships of the statements to each other, and the significant differences in the information they provide.
• Continue to provide a discussion and analysis of year-to-year changes.
• Continue to present in a manner that avoids unnecessary duplication.

Unusual or Infrequent Items

• Unusual or infrequent items should be presented individually as the last presented flows of resources prior to the net change in resource flows in the government-wide governmental funds, and proprietary funds statements of resource flows.
• Unusual or infrequent items should include both inflows of resources and outflows of resources.
• Inflows of resources and outflows of resources related to unusual or infrequent items should be displayed separately on the government-wide, governmental funds and proprietary funds statements of resource flows and should not be netted.
• Information regarding whether an unusual or infrequent item is within the control of management should be disclosed in the notes to financial statements.

Operating vs. Non-Operating – Proprietary Fund Statements

• Operating revenues and expenses should be defined as revenues and expenses other than nonoperating revenues and expenses. Nonoperating revenues and expenses should be described as (1) subsidies received and provided, (2) revenues and expenses related to financing, (3) resources from the disposal of capital assets and inventory, (4) investment income and expenses, and (5) contributions to permanent and term endowments.
• The exception to the guidance for the classification of operating and nonoperating revenues and expenses should indicate that certain loan programs should classify interest revenue as operating revenue and interest expense as nonoperating expense.
• The definition of subsidies should be revised to (1) indicate that all transfers should be included, (2) clarify that subsidies can have a direct or indirect impact on user fees and charges, and (3) clarify that subsidies should be classified as noncapital subsidies unless limited to capital purposes.
• The statement of revenues, expenses and changes in fund net position should distinguish between operating and nonoperating revenues and expenses, as well as separately report noncapital subsidies and provide a subtotal for operating income (loss) and noncapital subsidies.

Budgetary Comparison Information

• Budgetary comparison information should be presented as RSI.
• Variances between the original budget and final budget amounts, and between the final budget amount and actual results, should be presented as part of the budgetary comparison schedule.
• An analysis of significant variations between the original budget and final budget amounts and final budget amounts and actual results should be included in notes to RSI.

Component Units

• Major component unit information should be separately presented in the reporting entity’s statements of net position and activities if it does not reduce the readability of the statements. If presenting information about each major component unit separately reduces the readability of the statements, combining statements of major component units should be included in the reporting entity’s basic financial statements after the fund financial statements.

Governmental Funds

• The guidance for issues related to the recognition in and presentation of governmental funds was removed from the scope of this project and was not included in the final Statement.

Unusual Nature and Infrequency of Occurrence Criteria

• The unusual nature and infrequency of occurrence criteria in existing guidance was not modified in this Statement.

The effective date of a final Statement should be for fiscal years beginning after June 15, 2025, and all reporting periods thereafter, with earlier application encouraged. Component units should implement the proposed guidance in the same year as their primary governments. The proposed guidance should be applied retroactively.

To find out how to comply with any of these areas, contact us. We are here to help.

Authored by Claire Wootton

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