On May 28, 2024, the GASB issued Statement No. 103, Financial Reporting Model Improvements. This statement builds on Statement No. 34, Basic Financial Statements—and Management’s Discussion and Analysis—for State and Local Governments. The primary objective of Statement No. 103 is to enhance the effectiveness of the financial reporting model. This involves providing information crucial for decision-making and assessing governmental accountability. It also aims to address application issues identified through pre-agenda research conducted by GASB.
Scope and Applicability
It provides key targeted improvements related to:
- Management’s discussion and analysis. This statement has refined the it structure and now focuses on five specific sections and is designed to avoid redundancy and provide clear, relevant information for the following:
- Overview of the Financial Statements
- Financial Summary
- Detailed Analysis
- Significant Capital Asset and Long-term Financing Activity
- Currently Known Facts, Decisions, or Conditions
- Unusual or infrequent items (previously known as extraordinary and special items). This Statement describes unusual or infrequent items as transactions and other events that are either unusual in nature or infrequent in occurrence. Governments are required to separately display the inflows and outflows related to each unusual or infrequent item as the last presented 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.
- Presentation of the proprietary fund statements. This Statement requires that the proprietary fund statement of revenues, expenses, and changes in fund net position continues to distinguish between operating and nonoperating revenues and expenses. Operating revenues and expenses are defined as revenues and expenses other than nonoperating revenues and expenses. Nonoperating revenues and expenses are defined as:
- 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.
Additionally, a subtotal for operating income (loss) and noncapital subsidies must be presented before reporting other nonoperating revenues and expenses.
- Major component unit information. This Statement requires governments to present each major component unit separately in the reporting entity’s statement of net position and statement of activities if it does not reduce the readability of the statements. If the readability of those statements would be reduced, combining statements of major component units should be presented after the fund financial statements.
- Budgetary comparison information. This Statement requires governments to present budgetary comparison information using a single method of communication—RSI. Governments also are required to present:
- variances between original and final budget amounts and
- variances between final budget and actual amounts.
An explanation of significant variances is required to be presented in notes to RSI.
Effective Date:
The requirements of Statement 103 are effective for fiscal years beginning after June 15, 2025, and all reporting periods thereafter. Early application is encouraged.
Conclusion
GASB Statement No. 103 marks the most significant change to governmental financial statements in recent years. For detailed guidance on its implementation and nuances, please refer to the full text available on the GASB website. The Pun Group’s State and Local Government Experts are available to assist.