GASB 103 Raises the Bar on Financial Reporting. Are You Ready?

Financial reporting just got more demanding. Stakeholders want more than numbers. They want clarity, context, and to understand what has changed, why it changed, and what happens next.

Governmental Accounting Standards Board (GASB) statement 103 accelerates that shift. It raises expectations across reporting, especially in areas where judgment, consistency, and explanation carry the most weight.

For many organizations, those expectations will reveal gaps that have stayed hidden until now.

Five Ways GASB 103 Will Change Reporting

These updates reshape how the financial statements tell the story and how closely others are able to examine and understand it.

Drawing a Clear Line Between Operations and Support

GASB 103 changes how proprietary funds present activity. It creates a clearer distinction between operating income and non-operating activities and adds a new category to non-operating activities defined as subsidies.

What does this mean:

• Assess and clearly separate operating revenues and expenses from non-operating activity
• Present subsidies, including noncapital subsidies, as a distinct line item
• Separate capital from noncapital subsidies and present a separate line item for operating income (loss) and noncapital subsidies before reporting other nonoperating revenues and expenses
• Apply this structure consistently across proprietary funds and reporting periods

Subsidies carry greater visibility and review. They include resources received or provided without a direct exchange of goods or services that influence pricing or funding.

If classifications vary across funds or periods, those inconsistencies will stand out.

Turn the Discussion Section Into Real Analysis

GASB 103 clarifies what does and does not belong in Management’s Discussion and Analysis (MD&A) and raises the bar for how to explain results.

What must change:

• Explaining why balances and results changed rather than just the magnitude of the change
• Stating only the dollar or percentage changes is insufficient
• Eliminates duplication across sections
• Focus on explaining significant, more meaningful topics
• Do not include subjective information and assume that a reader does not have detailed knowledge of governmental accounting and reporting

At the same time, the remaining sections require deeper, more useful discussion of performance across government-wide statements and major funds. This is a shift from simply describing results to also providing explanations and defending them.

Expect More Review of Unusual and Infrequent Items

GASB 103 replaces extraordinary and special items with a new category. Now, it’s necessary to identify and present unusual and infrequent items clearly and separately. These are events that are abnormal in nature or not expected to recur.

Required:

• Report these items gross, not net
• Present them just before the change in fund position
• Describe their nature and impact in the footnotes and whether they were in control of management

These items will no longer blend into the results. They will stand out and invite questions.

Identify Major Discrete Component Units

Governments that present discrete component units are now required to present each major component unit separately in the basic financial statements. This means a government should adopt a policy on what they consider a major component unit, so that they can apply it consistently and present the major component unit’s financial information separately.

Rethink How You Present Budgetary Comparisons

Budgetary reporting also changes in meaningful ways. The budgetary comparison schedules now move fully into required supplementary information (RSI), and governments no longer have an option to present them in the basic financial statements.

New expectations include:

• Show variance columns for original vs. final budget as over (under) rather than increase (decrease)
• Show variance columns for final budget vs. actual
• Explain significant differences in accompanying notes to RSI

These changes put more pressure on the narrative. Stakeholders will focus less on the numbers themselves and more on how well you explain and are accountable for significant variances.

Why This Matters Now

These updates change how users interpret financial results. If the explanations lack clarity, classifications are inconsistent, or the documentation falls short, confidence drops fast.

Readers will appreciate and focus on:

• How clearly performance is explained
• How consistently activities are classified
• How well supported decisions are that rely on judgment

This means deeper analysis, more questions, and more pressure on financial team members.

How to Get Ahead of GASB 103

There is still time to strengthen the process before these requirements take hold.

• Start early and mockup the prior year MD&A under 103: Set up a checklist and collect information from other departments, identify expectations, and draft known analysis.
• Tighten how results are explained: Connect every change to a clear cause. Make the logic easy to follow and easy to defend.
• Align classification across the organization: Standardize how operating activity, nonoperating activity, and subsidies are classified. Remove inconsistencies before they create confusion.
• Strengthen support for key decisions: Document how complex transactions are reported. Make the reasoning visible and consistent.
• Rework the MD&A approach: Focus on clear, meaningful analysis. Remove duplication. Say what matters and back it up with insight.
• Upgrade budgetary explanations: Prepare for deeper review of variances. Make sure the explanations answer the “why,” not just the “what.”
• Address issues early: Fix weak spots now, while still controlling the narrative. It is harder to explain issues once they are surfaced.

Start Strengthening Your Reporting Today

You don’t need to tackle GASB 103 alone. Work with a CBIZ advisor to assess your current reporting, identify gaps, and document clear, defensible explanations for financial results before questions arise.