In part two of this series about Governmental Accounting Standards Board (GASB) statement no. 103, financial reporting model improvements, we covered the changes to the statement of revenues, expenses and changes in fund net position for proprietary funds. In this final article, we will discuss the remaining requirements of the new standard and recommendations for implementation.
Unusual or infrequent items
GASB statement no. 62 provided definitions for both “unusual in nature” and “infrequency of occurrence” which were then used to determine if items should be reported as special (either unusual or infrequent) or extraordinary (both unusual and infrequent). These concepts were taken from the pre-existing Financial Accounting Standards Board (FASB guidance), however there continued to be confusion and inconsistency in practice of reporting.
GASB 103 uses the existing definitions for “unusual in nature” and “infrequency of occurrence” and requires activities that meet these definitions to be reported as unusual items or infrequent items. These inflows and outflows should be presented separately and not netted on the:
- Government-wide statement of activities
- Governmental fund statement of revenues, expenditures and changes in fund balances
- Proprietary fund statement of revenues, expenses and changes in fund net position
These inflows/outflows are the last item presented in each statement of flows. In addition, the footnotes should disclose the program, function or identifiable activity that each unusual or infrequent item is related to, and if each was within the control of management.
Major component unit reporting
Within the basic financial statements, each major component unit should be presented separately. However, if this presentation on the statements of net position and activities would reduce the readability of the statements (i.e., font size on the page), a combined column can be presented. If the combined major component unit reporting is elected, a combining statement of major component units is required within the basic financial statements immediately after the fund financial statements.
The option to only present major component information within the footnotes has been eliminated. This was done to provide more consistency and to better align with the guidance in GASB concepts statement no. 3.
Budgetary comparison reporting
GASB 103 eliminates the option to present budgetary comparison schedules within the basic financial statements. With implementation, all budgetary comparison schedules, including the general fund and each major special revenue fund with a legally adopted budget, will be presented as required supplemental information (RSI). GASB believes this is more appropriate given the guidance in GASB concepts statement no. 3. In addition, each schedule should include columns for:
- Original budget
- Final budget
- Variance or difference from original to final budget amounts
- Actual amounts
- Variance between final budget and actual amounts
Finally, the notes to the RSI are required to include explanations for significant variations between original and final budget or between final budget and actual amounts. GASB concluded these notes were essential to the accountability and transparency of the budget information.
What should you be doing now to prepare for implementation?
Although the changes required by GASB 103 focus on year-end reporting and are not effective for years ending prior to June 30, 2026, it is important to start planning now. Consider these steps to facilitate a smooth transition for your organization:
- Review your existing financial statements to identify which changes will impact you
- Communicate with any component units that have a different fiscal year end to ensure coordinated implementation timing
- Create a crosswalk for required changes to the proprietary fund statement of revenues, expenses and changes in fund net position; specifically, document considerations and conclusions for items that will transition between operating and non-operating classifications
- If you present comparative financial statements, start recasting the prior year’s information early to provide a basis for implementation
- Engage with others outside of the finance department that need to provide additional analysis information for the MD&A or new information for the budgetary comparison schedules
- Discuss questions or concerns with your auditors during interim/planning work or earlier to ensure consistent expectations and timely year-end reporting
