If you've ever watched HGTV, you know how satisfying a good transformation can be. That's exactly how I think about GASB Statement No. 103 — it's an extreme makeover for government financial reporting. And much like those renovation shows, the result is cleaner, more functional, and a lot more useful to the people who rely on it every day.
The good news? This one is actually pretty manageable. The standard itself is only eight and a half pages long — nine if you include the opening summary, or eleven if you count the full document with the summary up front. I always joke with clients about 'light reading,' but this time I genuinely mean it. Go pick it up.
The effective date for GASB 103 is for fiscal years beginning after June 15, 2025. That means if you have a June 30 year-end, implementation is June 30, 2026. Calendar year-end entities are looking at December 31, 2026. We are in the year of implementation. Now is the time to get moving.
The last major overhaul to the government financial reporting model was GASB 34, which came out in 1999 and was effective for fiscal year 2002. That means the fundamental framework has gone essentially unchanged for nearly 25 years. GASB has certainly been busy in that time — we've gone from Statement No. 34 all the way to No. 103 — but the core reporting model itself has been remarkably stable.
To be clear, even with GASB 103, things are not changing drastically. What was initially proposed actually included some significant changes — including a potential revamp of the basis of accounting for governmental funds, which was frankly terrifying. But what was ultimately released is measured, digestible, and focused on improving effectiveness and comparability. There are six main areas:
Let me walk you through each one.
The MD&A gets the most attention in this standard, and for good reason. GASB found that MD&As across the board had become too boilerplate, lacked focus on reasons for change year over year, and contained a lot of repetition. Their solution is to restructure the MD&A into five defined sections — and if information doesn't fit into one of those five, it shouldn't be in your MD&A.
The five sections are:
The theme throughout is avoid duplication and add detail. I know those two things sound counterintuitive together, but stay with me.
This section is largely unchanged, and GASB actually carved out an exception here — boilerplate language is acceptable in this section because there are only so many creative ways to explain the modified accrual basis of accounting. Keep what you have.
The condensed financial summary covers your government-wide statements only — your Exhibits 1 and 2. No funds. You'll distinguish between governmental-type and business-type activities, perform a current year to prior year comparison, and present the same key elements you always have. This section's primary purpose is to set up the data that supports your detailed analysis in Section 3.
This is where the real work happens. You'll perform detailed analysis for your government-wide statements and for each of your major funds. GASB is practically begging for less repetition here. If a variance shows up at both the fund level and the government-wide level and it has the same explanation — say, an increase in real estate and personal property tax rates — you explain it once and cross-reference it the second time. Just make sure the explanation actually exists wherever you're pointing.
What GASB really wants is the 'why' and the 'how.' A useful example comes from comparing the old approach and the new one. Under the old approach, you might write something like: hotel lodging increased $9.7 million, or 8%, over the prior year due to an increase in average daily room rate, number of visitors, and room inventory. Under GASB 103, they want more: specific occupancy rate percentages, room rate changes by percentage, visitor number trends, convention attendance data. The details that tell the actual story.
Appendix C of the standard includes a full sample MD&A — 13 to 14 pages of examples. I didn't include it in my presentation because of the length, but if you want a guide as you're rebuilding your MD&A, go look at it. No need to reinvent the wheel.
This section requires a detailed narrative about significant capital and debt activity during the year. Think about CIP additions — what projects, what amounts, expected completion dates. What came out of CIP and was placed in service? How was it funded? On the debt side, address new issuances, payments, any credit rating changes, and any changes to debt limits. Leases and subscriptions are included here — they're capital assets and long-term obligations now, and they deserve the same level of discussion.
This section covers information you're aware of as of the date the financial statements are issued. GASB offers several examples of what belongs here: demographic trends like population, income, and unemployment changes; factors used to develop the subsequent year's budget; early-year activity that's already affecting budget-to-actual comparisons; significant debt, project, and lease actions; and relevant state or regulatory changes that will significantly impact your entity.
One important clarification: significant doesn't always mean material. You might have information that's truly valuable to readers — something that doesn't result in a large dollar impact but still matters. That can still be included here.
These used to be called extraordinary items. They'll now be labeled unusual or infrequent items. The original definition from GASB 62 remains intact: a transaction is unusual or infrequent if it has a high degree of abnormality and is not reasonably expected to recur in the foreseeable future.
These items will be presented at the very bottom of your statement — just before the change in fund balance or change in net position. Importantly, you do not net the inflows and outflows together. Show them separately so users can see the full picture of what happened.
This is the section of the standard where I usually tell the audience: if you zoned out, now is the time to zone back in.
It's not new that we break out operating and non-operating revenues and expenses. What is new is the redefinition of those terms. The standard defines operating as revenues and expenses other than non-operating revenues and expenses. I'll admit — my first reaction when I read that was genuine frustration. But the logic becomes clear once you understand their approach: they defined non-operating precisely, and anything that doesn't meet that definition is operating by default.
Non-operating revenues and expenses now include:
There are also new subtotals on your proprietary fund statements. The purpose is to more clearly show whether a fund is truly self-sufficient, or whether it depends on non-capital subsidies to continue providing services. These changes apply to your enterprise funds and internal service funds.
A subsidy received is a resource from another party or fund where your proprietary fund is not providing goods or services in return — it's not an exchange transaction. Both conditions must be true. Additionally, a subsidy helps keep current or future fees down. All other transfers also fall under the subsidy definition.
Within subsidies, you'll now distinguish between non-capital subsidies — which get their own presentation line — and capital subsidies, which go with other non-operating revenues and expenses. The determining factor is the original intent of the provider. If the resource provider didn't restrict the funds for capital use, it's a non-capital subsidy, even if you internally chose to use the money for a capital project.
A few reclassifications caught me off guard and required more than one read-through. Here are the highlights:
I'll be honest — the lease revenue treatment is one I had to sit with for a while, and I've seen others in the profession express the same reaction. But once you trace the logic, it holds together.
Here's something with real downstream consequences. Transfers are now considered non-operating items — and non-operating items are included in the major enterprise fund calculation. Previously, transfers were intentionally excluded from that calculation. Now they're in.
This means some funds that were non-major could become major based solely on transfer activity. If that happens, you'll need to follow GASB 100 to properly disclose the change, move the fund out of the non-major aggregate column, and present a beginning net position reconciliation in the notes because the prior year aggregate column will no longer tie.
GASB 103 doesn't change the definition of a component unit — just the presentation requirements for major ones. Previously, you had three options: present each one individually in the government-wide statements, use one combined column with a separate combining schedule, or disclose in the notes. GASB 103 is eliminating those alternatives. Major component units must now be individually presented in the government-wide exhibits.
The exception: if you have so many major component units that presenting them all individually would make the statements unreadable, you can use a combined column in the government-wide exhibits — but then you must present the combining statement as part of the basic financial statements, right after your funds and right before the notes. Not RSI. Not other supplementary information. Basic financials.
Prior to GASB 103, you had the option to present your budget-to-actual exhibits as part of the basic financial statements. That option is going away. GASB 103 now requires budgetary comparison information to be presented as RSI for the general fund and major special revenue funds that have a legally adopted budget.
Two new requirements come with this:
A few carve-outs: these changes don't affect budgets in other supplementary information (non-major special revenue funds, capital projects, or debt service funds). School boards that are discreetly presented component units in a locality's ACFIR also aren't affected by this, since their statements sit in other supplementary information. But if a school board issues its own standalone ACFIR, this does apply.
The statistical section update is fairly straightforward. You'll need to make sure that financial trends information for proprietary funds reflects the new structure — the new categories and subtotals we discussed for operating and non-operating.
Here's the practical guidance I'd leave you with as you head into implementation:
One final note: Appendix C of GASB 103 contains 22 exhibits and examples. It's an excellent resource as you're working through implementation. No reason to build everything from scratch when a solid guide is right there.
If you have questions as you work through this, don't hesitate to reach out. We're happy to be a resource as you navigate the year of implementation.