Government finance never stands still—just as teams are wrapping up implementations of recent standards like GASB 87 and 96, new updates are here. GASB 102, 103, and 104 bring important changes to risk disclosures, financial reporting models, and capital asset notes. While the technical language can feel overwhelming, these updates are designed to improve transparency, strengthen accountability, and make financial statements more useful for decision-making.
Here’s what you need to know.
GASB 102 – Certain Risk Disclosures
Effective for fiscal years beginning after June 15, 2024, GASB 102 requires governments to provide more detail about risks related to vulnerabilities from concentrations and constraints.
- Concentration: A lack of diversity in a significant inflow or outflow of resources (for example, over-reliance on one tax revenue stream).
- Constraint: A limitation imposed by an external party or the government’s highest level of authority (such as a voter-approved spending cap).
When disclosure is required:
All three of these conditions must be met:
- The concentration or constraint is known before the financials are issued.
- It creates vulnerability to a substantial impact.
- Events tied to it are occurring, have begun, or are more likely than not to occur within 12 months of issuance.
What to disclose:
- The concentration or constraint itself.
- Events that could cause a substantial impact.
- Actions the government has taken to mitigate the risk.
Why it matters: These disclosures help users understand potential vulnerabilities that could affect your entity’s financial stability.
GASB 103 – Financial Reporting Model Improvements
Effective for fiscal years beginning after June 15, 2025
This is a broad update designed to enhance the usefulness of government financial statements. Key areas affected include:
1. Management’s Discussion and Analysis (MD&A)
- Expanded overview of financial statements and their relationships.
- A financial summary with more emphasis on explaining why balances changed, not just what changed.
- Detailed analysis of government-wide and fund-level results, including the effects of market conditions, internal policy changes, and significant capital asset or long-term financing activity.
- Clear disclosure of currently known facts, decisions, or conditions expected to impact future operations.
2. Unusual or Infrequent Items
- Extraordinary and special items are replaced with a single category: Unusual or Infrequent Items.
- These must be presented separately, not netted together, and shown before the change in fund balance/net position.
3. Proprietary Fund Reporting
- Distinguishes between operating and nonoperating revenues/expenses.
- Subsidies must be disclosed separately (defined as resources received or provided that affect fee structures).
4. Component Unit Information
- Major component units must be presented separately unless doing so reduces readability. In that case, combining statements must still be included.
5. Budgetary Comparison Information
- Required as RSI (Required Supplementary Information) for the General Fund and major special revenue funds.
- Must show variances between Original vs. Final Budget and Final Budget vs. Actual.
- Significant variations must be explained in the notes.
Why it matters: GASB 103 shifts financial reporting toward more clarity and storytelling, helping users better understand financial performance and future outlook.
GASB 104 – Disclosure of Certain Capital Assets
Effective for fiscal years beginning after June 15, 2025
GASB 104 focuses on improving capital asset note disclosures by requiring certain assets to be disclosed separately.
New required categories include:
- Lease assets (GASB 87) by major class of underlying assets.
- Intangible right-to-use assets (GASB 94).
- Subscription-based IT arrangements (SBITAs) (GASB 96).
- Other intangible assets by major class.
Capital Assets Held for Sale
An asset is considered held for sale if:
- The government has decided to pursue a sale.
- It’s probable the sale will be completed within a year.
Factors include availability for immediate sale, market conditions, active efforts to locate a buyer, and necessary regulatory approvals.
Disclosures must include:
- Historical cost.
- Accumulated depreciation by major class.
- Any debt for which the asset is pledged as collateral.
Why it matters: These disclosures increase transparency around capital assets—particularly those tied to long-term obligations or future changes in operations.
Key Takeaways for Finance Teams
- Plan ahead. GASB 102 is already effective, and GASB 103 and 104 take effect for FY 2026 reporting. Early planning reduces last-minute headaches.
- Strengthen collaboration. Finance staff, auditors, and consultants will need to work closely to implement these changes smoothly.
- Update policies and procedures. Documentation practices, MD&A preparation, and capital asset tracking will all need attention.
- Communicate internally. These standards are not just about compliance—they provide valuable insights for boards, councils, and the public.
Final Thoughts
GASB 102, 103, and 104 mark an evolution in financial reporting, emphasizing risk awareness, clarity in financial storytelling, and transparency in capital asset disclosures. While implementation will take time and effort, these standards ultimately make financial statements more meaningful for decision-makers and stakeholders.
If your team needs guidance on implementing these standards—or simply wants a roadmap for what’s coming next—our advisors at LSL are here to help. Contact us today!
