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Key Takeaways
- Newly issued standards, GASB Statement No. 102, 103, and No. 104, focus on improving financial reporting through enhanced disclosures and consistency.
- Statement No. 103 emphasizes the need for detailed Management’s Discussion and Analysis and changes in the presentation of budgetary comparison information and to the proprietary fund statement of revenues, expenses and changes in net position.
- Statement No. 101, on compensated absences, is effective for fiscal years beginning after December 15, 2023. Statements No. 99 and 100 are effective for June 30, 2024, and December 31, 2024, fiscal year ends.
The past few years have included significant changes to financial reporting for governmental entities, including:
- Updated standards for fiduciary activities (GASB 84)
- Leases (GASB 87)
- Subscription-based information technology arrangements (GASB 96)
Many governmental entities have also dealt with the impacts of COVID-19 including additional grant funding, which has resulted in increased oversight, compliance, and reporting activities.
While the upcoming updates likely will not cause as significant a burden for financial reporting, there are still new standards on the horizon to be implemented over the next few years that entities should be monitoring.
Recently Issued Standards
GASB issued Statement No. 102 in December 2023 and Statement No. 103 in April 2024. These should improve financial reporting by providing key concentrations and constraints information to financial statement users and should improve financial reporting consistency, respectively. One of the most significant changes is outlined in Statement No. 103, which provides guidance to improve Management’s Discussion and Analysis. Both standards will result in presentation and disclosure changes, but do not revise accounting for any specific transactions. In addition, GASB issued Statement No. 104 in September 2024, which establishes disclosure requirements for certain capital assets.
Below is a summary of each of these new standards:
| Statement No. 104 – Disclosure of Certain Capital Assets | |
|---|---|
| Summary: This statement establishes requirements for certain types of capital assets to be disclosed separately in the capital assets note disclosures. In addition, it establishes requirements for capital assets held for sale. The following capital assets and related amortization should be disclosed separately:
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| Effective date for non-PBEs | Fiscal years beginning after June 15, 2025 |
| Early adoption | Encouraged |
| Statement No. 103 – Financial Reporting Model Improvements | |
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| Summary: This standard updates requirements related to financial reporting. The requirements related to Management’s Discussion and Analysis are revised and discuss the need for a detailed analysis to explain the underlying reasons why balances change rather than simply presenting the amounts or percentages, as well as emphasizing avoidance of boilerplate language. The update also changes requirements related to budgetary comparison information, which must now be presented as required supplementary information (RSI) rather than as one of the basic financial statements. Other changes include updates to clarify presentation requirements related to unusual or infrequent items; presentation of proprietary fund statement of revenues, expenses, and changes in fund net position; major component unit information; and statistical information. | |
| Effective date | Fiscal years beginning after June 15, 2025 |
| Early adoption | Encouraged |
| Statement No. 102 – Certain Risk Disclosures | |
|---|---|
Summary: The purpose of this standard is to provide financial statement users with essential information related to concentrations and constraints of the entity that is often not provided currently. Under the standard, note disclosures will be required when all the following criteria are met:
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| Effective date for non-PBEs | Fiscal years beginning after June 15, 2024 |
| Early adoption | Encouraged |
Standards Effective Now or Soon
The most significant standard change on the horizon is the update to compensated absences (Statement No. 101). This will be effective for December 31, 2024, and June 30, 2025, year ends. This update of the measurement and recognition guidance for compensated absences is designed to better meet information needs of financial statement users.
The significance of the change will likely be based on the nature of leave provided by governmental entities and how they have previously accounted for that leave. The new guidance provides information to better define what constitutes a compensated absence and when the related liability should be recognized.
In addition, Statements No. 99 and 100 are effective for June 30, 2024, and December 31, 2024, fiscal year ends.
| Statement No. 99 – Omnibus 2022 | |
|---|---|
| Summary: Statement No. 99 includes various updates including guidance related to financial guarantees and reporting of other derivative instruments and termination of hedge accounting. All updates related to this standard should have been adopted for June 30, 2023, year-end dates, except the updates related to financial guarantees and derivative instruments which are effective as described below. The guidance for financial guarantees establishes accounting and financial reporting requirements for exchange and exchange-like financial guarantees. A government that has extended an exchange or exchange-like financial guarantee should apply the provisions of GASB 70 (specifically paragraphs 7-10 and 13) for the recognition of a liability and an expense or expenditure except for the requirements in paragraphs 9 and 10 of GASB 70 to classify expenses or expenditures in the same manner as grants or financial assistance payments. Derivative instruments that are within the scope of GASB 53 but do not meet the definition of an investment derivative instrument or the definition of a hedging derivative instrument are considered other derivative instruments. The updates in this standard establish reporting and disclosure requirements related to these instruments. They also address presentation related to termination of hedge accounting. |
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| Effective date | Varies; Provision related to financial guarantees and classification and reporting of derivative instruments are effective for fiscal years beginning after June 15, 2023. |
| Early adoption | Encouraged |
| Statement No. 100 – Accounting Changes and Error Corrections | |
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Summary: GASB 100 defines accounting changes into three categories: changes in principles, changes in estimates, and changes to or within the financial reporting entity. The update is an amendment of the previously issued guidance in GASB Statement No. 62. This standard revises the presentation and disclosure requirements related to changes in accounting principles, changes in estimates, and changes to or within the financial reporting entity. It also specifies how required supplementary information and supplementary information should be adjusted for accounting changes and error corrections. The disclosure requirements include, among other changes, a requirement to include information in a tabular format that reconciles beginning balances previously reported to the beginning balances as restated for each reporting unit to show the effects on beginning net position, fund balance, or fund position of the earliest period restated, summarized by:
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| Effective date | Fiscal years beginning after June 15, 2023 |
| Early adoption | Encouraged |
| Statement No. 101 – Compensated Absences | |
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| Summary: The provisions of this standard modernize the types of leave that are considered compensated absence and provides guidance for a consistent recognition and measurement of the compensated absence liability. Under the provisions of this standard, a compensated absence is leave for which employees may receive one or more of 1) cash payments when the leave is used for time off, 2) other cash payments, such as payment for unused leave upon termination of employment, or 3) noncash settlements, such as conversion to defined postemployment benefits. The guidance provides that a compensated absence liability should be recognized if the leave meets all the following criteria:
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| Effective date | Fiscal years beginning after December 15, 2023 |
| Early adoption | Encouraged |
Next Steps for Governments with GASB Implementation
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