Preparing Higher Education Institutions for GASB 103 and 104

The Governmental Accounting Standards Board’s (GASB) Statements No. 103, Financial Reporting Model Improvements, and No. 104, Disclosure of Certain Capital Assets, introduce meaningful changes to financial reporting for public colleges and universities. Many institutions may view these standards as technical accounting updates, but their impact extends well beyond the finance office. Together, they reshape how institutions present their financial position, explain operating results and disclose key capital assets, providing governing boards, bondholders, legislators and other stakeholders with clearer, more decision-useful information.

For higher education institutions, implementation will require more than updating financial statement templates. Finance leaders should begin evaluating how revenues are classified, how management communicates financial performance and whether existing reporting processes capture the information needed to comply with the new requirements. Institutions with affiliated foundations, research organizations or health systems may also need to revisit how component units are presented in their financial statements.

Although GASB 103 represents the broader reporting overhaul, GASB 104 introduces important new disclosure requirements for certain intangible capital assets and assets held for sale. Preparing for both standards now can help institutions avoid last-minute reporting challenges and create a smoother transition when the standards become effective.

Key implementation strategies highlight the changes most likely to affect public colleges and universities and outline practical steps finance leaders can take to prepare.

Rethink Your MD&A

For many institutions, the most significant change under GASB 103 will be the revised management’s discussion and analysis (MD&A). Rather than simply reorganizing the section, the standard places greater emphasis on helping readers understand the factors driving an institution’s financial performance.

GASB 103 requires the MD&A to follow five sections: an overview, financial summary, detailed analysis, capital and long-term financing activity, and currently known facts. While the required structure is straightforward, institutions may find that preparing the narrative requires more collaboration across finance, budgeting and leadership than in prior years.
Boilerplate language will no longer meet stakeholder expectations. Instead, institutions should clearly explain the reasons behind significant changes in revenues, expenses and financial position. For example, enrollment trends, changes in state appropriations, the expiration of federal grant funding or strategic investments in academic programs may all provide important context for understanding year-over-year results.

The revised MD&A also shifts budgetary analysis out of the narrative. Institutions that choose to reference budget information should limit those comments to the “Currently Known Facts” section when appropriate. At the same time, finance teams should consider using charts, graphs and other visual elements to help governing boards, bondholders and other stakeholders quickly understand key financial trends.

Finally, colleges and universities should begin thinking beyond the current reporting period. The “Currently Known Facts” section provides an opportunity to discuss matters that may affect future financial performance, such as enrollment projections, changes in state funding formulas, accreditation developments or anticipated shifts in federal financial aid programs. Developing a process for identifying and evaluating these issues before year-end can help produce a more meaningful and informative MD&A.

Reevaluate Revenue Classification

Because nearly all public colleges and universities report as enterprise funds, the revised presentation requirements for proprietary funds are likely to have a significant impact on financial reporting. Under GASB 103, institutions must update the Statement of Revenues, Expenses and Changes in Net Position to reflect new required sections and subtotals, including the addition of noncapital subsidies as a separate reporting category.

For many institutions, the more significant challenge will be determining how existing revenue streams should be classified under the new subsidy framework. State appropriations, nonexchange grants, financial aid and transfers between funds should all be evaluated to determine whether they meet the definition of a subsidy and should be reported as noncapital subsidies rather than as non-operating revenues.

Higher education institutions should pay particular attention to state appropriations and student financial aid programs. Depending on the facts and circumstances, institutions should evaluate funding sources such as Pell Grants, state need-based aid and other grants to determine the appropriate classification under the new reporting model. Likewise, transfers between funds should be reviewed to distinguish between capital and noncapital transfers, particularly when restrictions on the use of funds are not clearly documented.

Rather than waiting until year-end reporting begins, finance teams should start reviewing their chart of accounts, mapping revenue sources to the new reporting categories and updating financial statement templates. Early planning can help identify classification questions, reduce implementation challenges and support a smoother transition to the revised reporting model.

Review Component Unit Reporting

Public colleges and universities often have complex organizational structures that include affiliated foundations, research corporations, athletics associations or health systems. Under GASB 103, institutions with major component units will need to revisit how those entities are presented in the financial statements.

The standard eliminates the option to aggregate major component units into a single column. Instead, each major component unit must be presented separately in the Statement of Net Position and Statement of Revenues, Expenses and Changes in Net Position, providing greater transparency into the financial position and operations of these organizations. While this change improves financial reporting, it may also require institutions to rethink how information is collected, organized and presented.

Institutions with multiple affiliated organizations should begin evaluating which component units meet the criteria for “separate presentation” and whether additional reporting processes will be needed to support the new requirements. If separate presentation makes the statements more difficult to read, GASB 103 permits institutions to include combining statements after the fund financial statements. Finance leaders should discuss the most appropriate presentation approach with their auditors well before year-end reporting begins.

Identify Unusual or Infrequent Items Early

GASB 103 replaces the concepts of special and extraordinary items with a broader category of unusual or infrequent items. Because an event no longer has to be both unusual and infrequent to warrant separate reporting, institutions may need to evaluate transactions that previously would not have received special presentation.

For colleges and universities, examples might include significant litigation settlements, one-time federal grant clawbacks, major facility write-offs or the elimination of academic programs. Whether a transaction qualifies depends on the institution’s specific circumstances, making early communication between finance leaders and auditors especially important.

Rather than waiting until the financial statements are drafted, institutions should establish a process for identifying potentially reportable transactions throughout the year. Early evaluation can help avoid last-minute reporting decisions and ensure that qualifying items are presented appropriately.

Prepare for Expanded Capital Asset Disclosures

After addressing the broader reporting changes introduced by GASB 103, institutions should also prepare for the new capital asset disclosure requirements under GASB 104. Although the standard does not change how institutions report capital assets on the Statement of Net Position, it does require additional note disclosures for certain intangible assets and capital assets held for sale.

For many public colleges and universities, the most significant impact will involve intangible assets, including right-to-use assets recognized under lease accounting, subscription-based information technology arrangements (SBITAs) and public-private or public-public partnership arrangements. Institutions also will need to separately disclose other major classes of intangible assets, making now a good time to review capital asset records and confirm assets are classified appropriately.

GASB 104 also establishes new disclosure requirements for capital assets held for sale. Assets qualify as held for sale only when management has decided to sell them and it is probable the sale will be completed within one year of the financial statement date. Institutions should evaluate potential asset sales early and confirm they have documentation to support the classification and required disclosures.

Although these changes affect note disclosures rather than the face of the financial statements, they may require updates to capital asset tracking processes and coordination among finance, facilities and other departments responsible for managing institutional assets. Reviewing capital asset inventories now can help identify potential reporting issues before year-end.

Start Implementation Now

Although the effective dates for GASB 103 and 104 may seem well into the future, institutions that begin preparing now are likely to experience a smoother implementation process. Many of the required changes, from updating MD&A templates and financial statement formats to evaluating revenue classifications and reviewing capital asset records, will take time to coordinate across multiple departments. Rather than waiting for additional implementation guidance, institutions can begin preparing now by reviewing reporting templates, evaluating revenue classifications and coordinating early with their auditors.

Finance leaders should begin by reviewing their chart of accounts and mapping revenue sources to the new reporting categories, particularly state appropriations, grants, financial aid and transfers. Institutions should also evaluate major component units, update financial reporting templates and review capital asset records to ensure intangible assets and assets held for sale can be identified and disclosed appropriately. Early discussions with auditors can help resolve interpretation questions before year-end reporting begins.
Successful implementation will require coordination across accounting, budgeting, treasury and other institutional functions. Starting those conversations now can help identify potential challenges before the first reporting cycle under the new standards.

Perhaps most importantly, implementation should not be viewed as simply an accounting exercise. Preparing for GASB 103 and 104 provides an opportunity to improve how institutions communicate financial performance to governing boards, rating agencies, legislators and other stakeholders. By starting early and taking a thoughtful approach to implementation, colleges and universities can strengthen both compliance and the overall quality of their financial reporting.

As you take these steps toward implementation, contact us to learn how we can help.

Authored by Brandon Tran

©2026

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