July 8, 2024

Key Points From GASB 103 Financial Reporting Model Improvements

In April 2024, the Governmental Accounting Standards Board (GASB) issued Statement No. 103 Financial Reporting Model Improvements. The objective of this Statement is to improve key components of the financial reporting model to enhance its effectiveness in providing information that is essential for decision making and assessing a government's accountability. This Statement also addresses certain application issues. The requirements of this Statement are effective for fiscal years beginning after June 15, 2025, and all reporting periods thereafter. Earlier application is encouraged. The following key points have been outlined and summarized below.

Management Discussion and Analysis (MD&A) section:

This section serves as a required supplementary information (RSI) preceding the basic financial statements and offers as an objective analysis of the government's financial activities, comparing current and prior years. The current structure of MD&A content has been refined into five different sections to avoid duplication and bring focus to pertinent topics. These sections include:

  • Overview of Financial Statements
    • An overview of the basic financial statements, including the relationships of the statements to each other.
    • Should focus on the significant differences in the types of information the financial statements provide.
  • Financial Summary
    • Condensed financial information derived from the government-wide financial statements comparing the current year to the prior year for both governmental activities and business-type activities.
    • Governments should present the information needed to support their analysis of financial position and results of operations. Some examples of this may include, but are not limited to total deferred inflows and outflows of resources, program revenues by major source, change in net position, total expenses, etc.
  • Detailed Analyses
    • An analysis of the primary government's financial position and results of operations, as well as an analysis of fund balance or net position and results of operations of each major fund.
    • Should summarize significant changes to both governmental activities and business-type activities as reported in the financial statements, explaining why the changes occurred and indicating the magnitude of those changes; should also include facts, decisions, or conditions the user may not be aware of and should be a discussion of significant policy changes and important economic factors that affected operating results for the year.
    • Should also summarize significant changes to each major fund and should refer to the analysis of significant capital asset and long-term financing activity rather than duplicating information.
  • Significant Capital Asset and Long-Term Financing Activity
    • A description of significant capital asset activity during the year, including a discussion of significant additions and disposals of capital assets and changes to commitments made for acquisitions of capital assets. The description should also address any significant policy changes and economic factors relevant to capital asset activity that occurred during the year.
    • Should also include a description of significant long-term financing activity during the year, including debt, leases, public-private and public-public partnerships (PPPs). and subscription-based information technology agreements (SBITAs). The description should include a discussion of any agreements entered into, changes in credit ratings, and changes to debt limitations that may affect financing. Any significant policy changes and economic factors relevant to long-term financing should be addressed.
  • Currently Known Facts, Decisions or Conditions
    • A description of currently known facts, decisions, or conditions that are expected to have a significant effect on financial position or that are expected to produce significant differences from current-period results of operations (revenues, expenses, and other changes in net position).
    • Examples include:
      • Trends in relevant economic and demographic data, such as changes in population, customer base, income levels, building permits, enrollment, unemployment rates, etc.
      • Relevant factors used to develop the subsequent year's budget that will provide an indication of how results of operations are expected to change.
      • Expected changes in budgetary net position or fund balance.
      • Actions the government has taken related to post employer benefit liabilities, capital asset improvement plans, lessee liabilities, operator liabilities in PPP arrangements, SBITA liabilities, and other long-term financings that will affect the government in a subsequent period.
      • Actions other parties have taken that will affect the government in a subsequent period, such as new legislation or regulations imposed on the government.

The examples above are not all-inclusive as each government operates differently. Any additional information about facts, decisions, or conditions that are expected to have a significant effect on financial position should be provided in this section.

Unusual and Infrequent Items Statement:

This statement further clarifies the definition of an unusual and infrequent item, previously known as an extraordinary and special item. These items must be of unusual nature (possessing a high degree of abnormality and be a type clearly unrelated to or incidentally related to the ordinary and typical activities of the government and operations) and infrequent in occurrence (of a type that would not reasonably be expected to recur in the foreseeable future, considering the environment in which the government operates). An item must meet both criteria to be considered unusual and infrequent. What is classified as these items is unique to each government, as each operates differently than another. According to GASB Statement 62, the following should not be classified as unusual: write-off of receivables, inventories, equipment leased to others, or intangible assets; gains or losses from the sale or abandonment of capital assets used in operations; and gains or losses from exchange or translation of foreign currencies. These items may recur based on operations and therefore should not be classified as unusual.

Governments should present inflows and outflows related to these items as the last presented flow(s) of resources (prior to the net change in resources flows in the government-wide, governmental-fund, and proprietary-fund statements of resource flows). Each item should be presented separately. Governments should disclose in notes to financial statements the program, function, or identifiable activity to which an unusual or infrequent item is related, if applicable, and whether that item is within the control of management.

Proprietary Fund Statement of Revenues, Expenses, and Changes in Fund Net Position:

GASB 103 indicate that the statement should continue to distinguish between operating and nonoperating revenues and expenses. However, the updated policy introduces a new subtotal for operating income/loss and noncapital subsides. This subtotal should now be presented before reporting other nonoperating revenues and expenses. The update also provides clearcut definitions for what is considered a(n) operating/nonoperating revenue and expense.

Major Component Unit Information:

The updated statement says that governments should present each major component unit separately in the reporting entity's statement of net position and activities, so long as it does not reduce the readability of the statements. In the instance it does reduce readability, combined statements of major component units should instead be presented after the fund financial statements.

Budgetary Comparison Information:

The statement now requires governments to present budgetary comparison information as supplementary information (RSI). The information should highlight variances between (1) original and final budget amounts and (2) final budget and actual amounts. Any significant variances are required to be presented in notes in the supplementary information (RSI).


The required changes to this statement are effective June 15, 2025, and all subsequent periods thereafter. Holsinger strongly encourages earlier application to ease transition. These requirements will improve the quality and relevance of MD&A analysis, provide further clarity on reporting unusual or infrequent items, and overall improves comparability through standardized definitions and formats.

For further details, please refer to the full GASB Statement 103. If you have any questions or need assistance with adoption, please contact a member of the Holsinger team.

Article written by Bella Newman