Accounting
Financial Management
GASB 103: Changes to the Financial Reporting Model for Governments and School Districts
Last updated: October 12, 2026 · Independent guide · We do not sell rankings or coverage.
GASB 103 (Statement No. 103, Financial Reporting Model Improvements) changes five parts of the state and local government reporting model: the content of management’s discussion and analysis (MD&A), how you present unusual or infrequent items, how proprietary funds split operating and nonoperating activity, how you show major component units, and where budgetary comparisons go. It is effective for fiscal years beginning after June 15, 2025, so a June 30 government first applies it in its fiscal 2026 report and a calendar-year government in its December 31, 2026 report. Most of the work for your finance office is reclassifying proprietary fund accounts and adjusting the report mappings that feed your annual comprehensive financial report (ACFR).
The rule in brief
- Who it applies to: state and local governments that report under GASB standards, including cities, counties, school districts, special districts and their component units.
- What changes: MD&A content, unusual or infrequent items, proprietary fund operating definitions and a new subtotal, major component unit presentation, and budgetary comparisons (now required supplementary information, or RSI, only).
- Effective date: fiscal years beginning after June 15, 2025, with earlier application encouraged (paragraph 18). Adoption is reported as a change in accounting principle under Statement No. 100 (paragraph 19).
- Official source: GASB Statement No. 103, dated April 2024 on its cover. We checked the statement and GASB’s implementation guidance on October 12, 2026.
What GASB 103 changes, old versus new
Statement 103 replaces options and government-specific policies in Statement No. 34 with single required methods. Its Basis for Conclusions explains each change against prior practice.
| Area | Before (Statement 34, as amended) | After (Statement 103) | Paragraphs |
|---|---|---|---|
| MD&A | Eight required elements, including analysis of budget variances | Five sections; must explain why balances and results changed; budget variance discussion moves to notes to RSI | 4 to 8, B31 |
| Unusual items | Extraordinary items (unusual and infrequent) and special items (within management’s control) | “Unusual or infrequent items,” each shown separately and not netted; management control disclosed in notes | 9, 10, B35, B36 |
| Proprietary funds | Each government set and disclosed its own policy for operating revenues and expenses | Five listed nonoperating categories; everything else is operating; new subtotal after noncapital subsidies | 11 to 14, B41 |
| Major component units | Three options: separate columns, combining statements, or condensed statements in the notes | Separate columns unless readability suffers, then combining statements after the fund statements; notes option removed | 15, B45 |
| Budgetary comparison | Basic financial statement or RSI | RSI only, with variance columns and explanations of significant variances in notes to RSI | 16, B48 |
What the rule requires in detail
MD&A: five sections and real explanations
Paragraph 8 limits MD&A to five sections: an overview of the financial statements; a financial summary; detailed analyses; significant capital asset and long-term financing activity; and currently known facts, decisions or conditions. The financial summary compares condensed government-wide figures for the current and prior year, separately for governmental and business-type activities. The detailed analyses cover the primary government and each major fund.
Paragraph 5 asks you to explain why balances and results changed, not only to state that they changed. Paragraph 8 tells governments to avoid “boilerplate” discussion. The capital and financing section explicitly includes lease, public-private partnership and SBITA assets and liabilities.
Unusual or infrequent items
Paragraph 9 defines these as transactions and other events that are unusual in nature or infrequent in occurrence. You report each inflow and outflow separately, without netting, as the last flows before the net change in resource flows. The notes must state the program, function or activity the item relates to and whether it was within management’s control (paragraph 10).
Proprietary funds: operating, nonoperating and the new subtotal
Paragraph 13 lists the only nonoperating revenues and expenses: subsidies received and provided; contributions to permanent and term endowments; revenues and expenses related to financing; resources from the disposal of capital assets and inventory; and investment income and expenses. Everything else is operating.
Paragraph 14 defines a subsidy received as resources from another party or fund for which the proprietary fund provides no goods or services and which keep its fees and charges lower. A subsidy provided is a resource given to a party or fund that provides no goods or services to the proprietary fund and that is recoverable through its pricing. All other transfers are also subsidies. GASB’s Implementation Guide No. 2025-1 (June 2025) adds that interest expense related to financing is always nonoperating (Question 4.2), that a subsidy is noncapital unless the provider limits its use to capital assets (Question 4.5), and that a payment in lieu of taxes is a subsidy only if its substance meets the definition (Question 4.6).
Paragraph 12 fixes the order of the statement. The illustration below uses invented amounts for a water fund.
| Line (order required by paragraph 12) | Illustrative water fund (USD) | What typically moves here |
|---|---|---|
| Total operating revenues | 8,400,000 | Charges for services, connection fees |
| Total operating expenses | (8,900,000) | Personnel, treatment, depreciation |
| Operating income (loss) | (500,000) | Subtotal |
| Total noncapital subsidies | 650,000 | Transfer in from the general fund, unrestricted operating grant |
| Operating income (loss) and noncapital subsidies | 150,000 | New subtotal |
| Total other nonoperating revenues and expenses | (120,000) | Bond interest, investment income, gain on asset sale, capital grants restricted by the provider |
| Income (loss) before unusual or infrequent items | 30,000 | Subtotal |
| Unusual or infrequent items | (210,000) | Flood damage cleanup, shown gross |
| Increase (decrease) in fund net position | (180,000) | Followed by beginning and ending net position |
In this illustration, readers can see at once that user charges alone do not cover operating costs and how much general fund support closes the gap.
Major component units
Under paragraph 15, you present each major component unit separately in the government-wide statements of net position and activities, unless that reduces readability. If it does, you present combining statements after the fund financial statements. Condensed component unit statements in the notes are no longer allowed (paragraph B45).
Budgetary comparison information
Paragraph 16 requires budgetary comparison schedules as RSI for the general fund and each major special revenue fund with a legally adopted annual budget. The schedules show the variance between original and final budget and between final budget and actual amounts. You explain significant variances in notes to RSI, and the variance discussion no longer appears in MD&A.
Who is exempt, and what is out of scope
No size exemption exists. The statement applies to every government that issues GAAP financial statements under GASB standards. A government with no proprietary funds has no operating classification work, and a fund without a legally adopted annual budget needs no budgetary comparison schedule. GASB removed governmental fund reporting issues from the project’s scope, as Cherry Bekaert and Weaver noted in their 2024 summaries, although paragraph 10 still applies the unusual or infrequent items presentation to the governmental fund statements.
Governments engaged only in business-type activities, or in business-type and fiduciary activities only, have one extra requirement. Paragraph 17 asks them to present revenues by major source in the statistical section of separately issued reports, split into operating, noncapital subsidy and other nonoperating categories.
Deadlines, transition and consequences
The statement is effective for fiscal years beginning after June 15, 2025. Fiscal years ending June 30, September 30 and December 31, 2026 are all first-year reports. The California State Controller’s Office, for example, states that the State will implement GASB 103 in its ACFR for the fiscal year ended June 30, 2026. If a primary government adopts early, its component units adopt in the same year (paragraph 18). Question 4.16 of Implementation Guide 2025-1 covers component units with a different fiscal year-end, so read it before you schedule a component unit’s adoption.
GASB itself imposes no penalties. The consequence of not adopting is a departure from generally accepted accounting principles, which your auditor evaluates when forming an opinion on your financial statements.
GASB has continued to issue guidance. An exposure draft on subsidies dated February 10, 2026 addressed Medicaid supplemental payments, research grants, taxes imposed by a business-type activity and airport passenger facility charges. The Journal of Accountancy reported on September 25, 2026 that GASB has issued Implementation Guide No. 2026-1 on subsidies, with seven new questions and answers and an amendment to Question 4.5 of Implementation Guide 2025-1.
Records you should keep
- A mapping of every proprietary fund revenue and expense account to operating, noncapital subsidy, or other nonoperating, with the paragraph 13 or 14 basis for each subsidy and transfer decision.
- For each grant or transfer treated as a capital subsidy, the provider’s restriction that limits its use to capital assets (Implementation Guide 2025-1, Question 4.5).
- For each unusual or infrequent item, the facts that make it unusual or infrequent, the related program or function, and whether management controlled it.
- Original and final adopted budgets, with each budget amendment and its approval date, for the general fund and major special revenue funds.
What to set up in your fund accounting and reporting software
None of the four vendors below publishes GASB 103-specific configuration guidance on the public pages we reviewed, so confirm details with your vendor or implementation partner. The changes are mostly in classification attributes and report definitions. If you build the ACFR from a trial balance export in a separate tool or workbook, make the mapping changes there.
- Add a GASB 103 classification to proprietary fund accounts. Create a reporting attribute or account rollup with four values: operating, noncapital subsidy, other nonoperating and unusual or infrequent. Review transfers, tax revenue in enterprise funds, interest expense, investment income, disposal gains and losses, and capital grants first.
- Separate unusual or infrequent items at the account level. Use dedicated object codes or a project code so the inflows and outflows stay gross, and so you can report the related program and the management control fact in the notes.
- Keep the original budget as its own version. The RSI schedule needs original, final and actual columns. Make sure your budget module retains the adopted budget after amendments post, and that reports can pull both versions for the general fund and major special revenue funds.
- Rebuild the proprietary fund statement report. Add the two new subtotals in the paragraph 12 order and remove the operating policy note language.
- Plan component unit data. If you move from note disclosure to columns or combining statements, you need a consistent chart mapping for each major component unit’s audited figures.
Tyler Technologies. Tyler’s financial management page describes multi-fund accounting, budgeting and “audit-ready reporting tools” and says the software supports “GAAFR and GAAP standards.” It does not mention GASB 103, so ask Tyler whether your ERP line ships updated statement templates.
Caselle. Caselle’s general ledger page says you can “customize financial statements and standard reports,” sort budget comparisons by fund or department, and build reports in Excel through its connector. Expect to make the subtotal changes yourself in those report definitions.
Sage Intacct. Sage’s government page claims “GASB-compliant fund accounting” and a dimensional chart of accounts, without naming specific standards. A dimension or reporting attribute can carry the GASB 103 classification without renumbering accounts. Our Sage Intacct review covers pricing and limitations.
Workday. Workday’s government financial management datasheet says it captures business dimensions at the point of transaction and supports budget versions and scenarios. The datasheet also says Workday assesses new standards and helps with adoption, without naming GASB 103, so confirm what is delivered and what you must configure.
For broader context on report design and close timing, see our guides to ERP reporting and analytics and accounting close automation.
How we researched this
We read the full text of GASB Statement No. 103, Implementation Guide 2025-1 and the 2026 subsidies exposure draft on GASB’s own site, and compared them with Statement No. 34. We reviewed state guidance from the California State Controller’s Office and GFOA’s August 2026 decision tree for proprietary fund transactions. We also read summaries from audit firms (BDO, Cherry Bekaert and Weaver) and the product pages of Tyler, Caselle, Sage Intacct and Workday. All sources were checked on October 12, 2026.
Related guides
- GASB 34 Reporting: Requirements and 2026 Changes
- ACFR: Sections, Timeline and How to Produce It
- GASB 54 Fund Balance Classifications Explained
Frequently asked questions
When does GASB 103 take effect for a June 30 city or school district?
It applies to fiscal years beginning after June 15, 2025, so a June 30 government applies it first for the year ended June 30, 2026. A calendar-year government applies it first for the year ending December 31, 2026. Early adoption was allowed.
Are transfers to an enterprise fund operating or nonoperating under GASB 103?
Transfers are subsidies under paragraph 14, and subsidies are nonoperating. A transfer is noncapital, and sits above the new subtotal, unless the provider limits its use to capital assets. Implementation Guide 2025-1, Question 4.5, says the recipient spending it on capital does not by itself make it a capital subsidy.
Where does interest expense go on the proprietary fund statement?
Interest expense related to financing is always nonoperating (Implementation Guide 2025-1, Question 4.2). It is reported in other nonoperating revenues and expenses, below the “operating income (loss) and noncapital subsidies” subtotal. Interest revenue from a loan program that is the fund’s principal ongoing operation is operating.
Can we still present the budget-to-actual statement as a basic financial statement?
No. Statement 103 requires budgetary comparison information as RSI only. You must show original-to-final and final-to-actual variances and explain significant variances in notes to RSI.
Do we need to restate prior years when we adopt GASB 103?
Paragraph 19 says changes made to conform are reported as a change in accounting principle under Statement No. 100. Discuss with your auditor how that applies to any comparative information you present, such as the prior-year columns in the MD&A financial summary.
Sources
- GASB, Statement No. 103, Financial Reporting Model Improvements, April 2024. storage.gasb.org
- GASB, Implementation Guide No. 2025-1, Implementation Guidance Update, June 2025. storage.gasb.org
- GASB, Exposure Draft, Proposed Implementation Guide, Financial Reporting Model Improvements: Subsidies, February 10, 2026. storage.gasb.org
- GASB, Statement No. 34, Basic Financial Statements and Management’s Discussion and Analysis for State and Local Governments, June 1999. storage.gasb.org
- Journal of Accountancy, GASB issues guidance for its reporting model related to subsidies, September 25, 2026. journalofaccountancy.com
- California State Controller’s Office, GASB 103 Overview, no date shown. sco.ca.gov
- GFOA, GASB 103: Proprietary Fund Transactions Reporting decision tree, August 2026. gfoa.org
- Cherry Bekaert (sells audit and advisory services), GASB 103 Financial Reporting Model Improvements Explained, June 20, 2024. cbh.com
- Weaver (sells audit and advisory services), Are You Ready to Implement the New GASB 103, July 30, 2024. weaver.com
- Tyler Technologies (vendor), Government Financial Management Software, no date shown. tylertech.com
- Caselle (vendor), General Ledger, no date shown. caselle.com
- Sage (vendor), Sage Intacct for government and public benefit organizations, no date shown. sage.com
- Workday (vendor), Workday Financial Management for the public sector datasheet, no date shown. workday.com
Sherman Hsieh
Independent analysis of enterprise software — ERP, CRM and more
