GASB 103 brings enhancements to the reporting model for utilities and general governments
GASB 103 clarifies and livens up the reporting model
GASB Statement No. 103, titled "Financial Reporting Model Improvements," aims to enhance the clarity, consistency, and usefulness of financial reports for state and local governments. This statement introduces key changes that adds more details to financial statements that provides more information for the financial statement reader.
Effective date
Statement No. 103 is effective for fiscal years beginning after June 15, 2025. Earlier implementation is allowed and encouraged by the GASB.
Management’s Discussion and Analysis (MD&A)
A component of GASB 103 is the continued requirement for Management’s Discussion and Analysis (MD&A) to precede the basic financial statements. The MD&A offers an objective and reader-friendly analysis of the government's financial activities, comparing the current and prior years. It must cover five specific 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 statement emphasizes the need for a detailed analysis that explains why balances and operations changed, rather than just stating the changes. It also discourages repetitive and generic explanations, promoting concise and relevant discussions focused on the primary government.
Statement No. 103 adds reporting enhancements to financial reporting for utilities and state and local governments
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Unusual or Infrequent Items
GASB 103 mandates that unusual or infrequent items, which are rare transactions or events, be displayed separately in financial statements. These items should be shown as the last resource flows before the net change in government-wide, governmental fund, and proprietary fund statements of resource flows.
Proprietary Fund Statements
The statement continues the distinction between operating and nonoperating revenues and expenses in proprietary fund statements. Nonoperating items include subsidies, endowment contributions, financing-related revenues and expenses, asset disposal proceeds, and investment income and expenses. A new requirement is the inclusion of a subtotal for operating income (loss) and noncapital subsidies before other nonoperating items.
Major Component Units
Governments must present each major component unit separately in the statement of net position and statement of activities to ensure clarity. If separating these units reduces readability, combining statements should be presented after the fund financial statements.
Budgetary Comparison Information
Budgetary comparison information should be presented as Required Supplementary Information (RSI), showing variances between the original, final, and actual budget amounts. Significant variances must be explained in the notes to the RSI.
What does this mean for your utility or governmental unit?
Statement No. 103 implements tweaks and enhancements to the reporting model, adding more information for oversight bodies and financial report readers to digest when analyzing your organization. As you plan financial statements for fiscal years beginning after June 15, 2025, these changes should be incorporated into your organization’s reports.
About Russ Hissom - Article Author
Russ Hissom, CPA is a principal of Utility Accounting & Rates Specialists a firm that provides power and utilities rate, expert witness, and consulting services, and online/on-demand courses on accounting, rates, FERC/RUS construction accounting, financial analysis, and business process improvement services. Russ was a partner in a national accounting and consulting firm for 20 years. He works with electric investor-owned and public power utilities, electric cooperatives, broadband providers, and gas, water, and wastewater utilities. His goal is to share industry best practices to help your business perform effectively and efficiently and meet the challenges of the changing power and utilities industry.
Find out more about Utility Accounting & Rates Specialists here, or you can reach Russ at russ.hissom@utilityeducation.com.
The material in this article is for informational purposes only and should not be taken as legal or accounting advice provided by Utility Accounting & Rates Specialists. You should seek formal advice on this topic from your accounting or legal advisor.