The Governmental Accounting Standards Board (GASB) has just rolled out the red carpet for GASBS 103, bringing a fresh wave of excitement to the world of state and local government financial statements. GASB has updated financial reporting model including but not limited to changes to GASBS 34, Basic Financial Statements – and Management’s Discussion and Analysis – for State and Local Governments with the implementation of GASBS 103, Financial Reporting Model Improvements established during 1999. Although the title may appear a bit overwhelming, the changes to the model are not as disruptive as one may think.

Key Changes of the Pronouncement

The key changes to the pronouncement include the following:

·         Management discussion and analysis (MD&A)

The pronouncement requires that the MD&A be limited to the following sections:

·         Overview of the Financial Statements

·         Financial Summary

·         Detailed Analyses

·         Significant Capital Asset and Long-Term Financing Activity

·         Currently Known Facts, Decisions, or Conditions.

The MD&A requirements are fairly consistent with the previous model. The most significant change is that the statement places more emphasis on the explanations of changes in operations and balances. Additionally, information should not be repeated throughout the MD&A. The MD&A should present the information necessary for decision makers and other financial statement users.

 ·         Unusual of infrequent items

Unusual or infrequent items are transactions that are either unusual in nature or infrequent in occurrence. Governments are now required to present unusual or infrequent items as the last presented flows of resources prior to the net change in resource flows in the government-wide, governmental fund, and proprietary fund statements of resource flows.

 ·         Proprietary funds

The presentation of the proprietary funds changes slightly to include an additional subtotal for operating income (loss) and noncapital subsidies to be reported before nonoperating revenues and expenses. Subsidies are defined as (1) resources received from another party or fund (a) for which the proprietary fund does not provide goods and services to the other party or fund and (b) that directly or indirectly keep the proprietary fund's current or future fees and charges lower than they would be otherwise, (2) resources provided to another party or fund (a) for which the other party or fund does not provide goods and services to the proprietary fund and (b) that are recoverable through the proprietary fund's current or future pricing policies, and (3) all other transfers. Nonoperating revenues and expenses now include subsidies within the category.

 ·         Major component units

The pronouncement requires each major component unit to be presented separately in the reporting statement of net position and statement of activities. If readability is reduced, a combining statement of major component units should be presented after the fund financial statements.

 ·         Budgetary comparisons

This pronouncement requires governments to present budgetary comparison information using a single method of communication—Required Supplementary Information

Effective Date

The effective date of the pronouncement is for fiscal years beginning after June 15, 2025, and all reporting periods thereafter. Earlier implementation is encouraged.

How will the changes improve financial reporting

The pronouncement provides a new structure for financial reporting that provides better explanations for changes in the MD&A, presents unusual or infrequent items on face of the financial statements, and removes repetitive information in the MD&A; among other changes. As a result of this pronouncement, the necessary information for financial statement readers and decision makers is presented in a clearer format.

If you need assistance implementing this pronouncement, CFLG is here to help. Contact us at (305) 662-7272 or email us at info@cflgcpa.com