GASB Statement No. 103 introduces targeted improvements to the financial reporting model for governmental entities, with significant changes in management's discussion and analysis, reporting of unusual or infrequent items, proprietary fund reporting, major component unit information, budgetary comparisons, and communication.
The Governmental Accounting Standards Board (GASB) continues its mission to enhance and refine governmental financial reporting with the release of GASB No. 103, Financial Reporting Model Improvements. This new standard will take effect for fiscal years starting after June 15, 2025 (fiscal year 2026). Depending on their fiscal year-end (June or August), school districts will have either three or five months to prepare for implementation from the date this article was written (March 2025).
GASB No. 103 introduces targeted enhancements to GASB No. 34, Basic Financial Statements—and Management’s Discussion and Analysis—for State and Local Governments. Key considerations for implementing GASB No. 103 include:
- Management’s Discussion and Analysis (MD&A)
GASB No. 103 refines the MD&A section by emphasizing the disclosure of known facts and future conditions that may significantly affect financial results. Governmental entities have become accustomed to boilerplate information or information that doesn’t provide sufficient analysis. As such, school districts will need to begin including detailed commentary on critical data like enrollment, revenue and expenditure data.
- Unusual or Infrequent Items
Items previously labeled as “extraordinary” or “special” are now grouped under “unusual or infrequent.” This change aims to standardize how atypical events or transactions are reported, offering clearer insight into nonrecurring events that may affect a school district’s financial performance. This should reduce confusion in categorizing certain items and assist with clarifying the reporting. GASB No. 103 on page 62 provides an illustrative financial statement for unusual or infrequent items. For example, if a government incurred flood damage, grants and cleanup expenses related to the flood incident would be listed separately under? that financial statement category.
- Proprietary Fund Reporting
While school school districts typically report using governmental funds like the general fund, special revenue fund, debt service fund, and capital project funds, GASB Statement No. 103 provides clearer guidelines for presenting revenues and expenses in proprietary funds, including the internal service fund. For school districts with enterprise-like activities, this new standard ensures a more distinct separation between operating and non-operating items, enhancing users' understanding of the school district's operational performance.
- Major Component Unit Information
The guidance emphasizes presenting major component units separately unless doing so would hinder the readability of the overall financial statements. For school districts, normally this would be a related to a not-for-profit education foundation. The thought here is to ensure that all material entities are properly reported and understood.
- Budgetary Comparison
Currently some school districts report budget-to-actual statements as a basic financial statement, prior to the financial statement notes. GASB No. 103 will no longer allow this presentation and rather must be included as required supplementary information (RSI). School districts will also need to provide explanations for significant variances between original and final budgets, budgeted and actual figures, in the notes to RSI.
- Communication to Governance
GASB No. 103 will enhance disclosure requirements to improve the effectiveness of financial reports. For school districts, this means more informative reports that support decision-making by the school board, rating agencies, regulatory entities, and other users of the financial statements.
Conclusion
GASB Statement No. 103 represents a modernization of the financial reporting model. For school districts, adapting to these changes means not only aligning with updated governmental accounting standards, but also improving the clarity and usefulness of financial disclosures—ultimately supporting more effective governance and informed decision-making.
