The Governmental Accounting Standards Board's Statement No. 103, Financial Reporting Model Improvements, rewrites the playbook state and local governments have used since GASB 34 in 1999. It is effective for fiscal years beginning after June 15, 2025 — meaning fiscal years ending June 30, 2026 and later must comply. For June-year-end governments, the first GASB 103 financials are due this audit cycle.
What GASB 103 Changes
Five areas move:
-
Management's Discussion and Analysis (MD&A). GASB 103 sharpens MD&A into a five-area analytical narrative: overview of financial statements, condensed financial information with year-over-year analysis, capital asset and long-term liability activity, budgetary highlights for the general fund, and currently known facts and decisions expected to affect financial position. Boilerplate MD&A that repeats the statements will be flagged.
-
Unusual or infrequent items. GASB 103 replaces the old extraordinary/special-item model with a single category — unusual or infrequent items — with display and disclosure that highlights whether an item is unusual in nature, infrequent in occurrence, or both, and where it hits the operating statement.
-
Proprietary fund reporting. The statement remixes proprietary fund operating versus non-operating classification, including how subsidies (including non-capital subsidies) are presented. Operating, non-capital subsidy, and non-operating revenues must be distinguished — a change that flows directly to the statistical section of an ACFR/ACAFR for trend analysis. If key revenue sources shift categories, GASB 100 guidance on prior-period presentation applies.
-
Component unit presentation. Disclosure and presentation of component units is refined to improve accountability reporting, particularly where a primary government is financially accountable for a legally separate entity.
-
Budgetary comparison. Budgetary comparison schedules for the general fund must align more tightly with the new MD&A budgetary highlights, and governments will need to ensure budget documentation supports the required analysis.
Subsidies: The February 2026 Clarification
In February 2026, GASB proposed implementation guidance with Q&As clarifying how subsidies — including transfers and grants that support operations — are classified under the new model. The draft confirms that non-capital subsidies that support ongoing operations are not operating revenue but are separately distinguished from non-operating, affecting both the change-in-net-position statement and the statistical section. Governments mid-implementation should map each recurring grant to the new categories now rather than at audit.
What to Do This Cycle
- Map every revenue line to the new operating / non-capital subsidy / non-operating buckets and document the rationale. Auditors will test the mapping.
- Rewrite MD&A against the five required areas; do not patch last year's MD&A. Engage finance, budget, and program staff to produce the forward-looking "currently known facts" section.
- Rebuild the statistical section trend tables where revenue-source classifications changed, with GASB 100 restatement or explanation for prior years presented.
- Update chart of accounts so the general ledger captures subsidy type at posting, not as a year-end reclass.
- Train the audit committee. GASB 103 changes the story the financials tell; the committee should understand why a formerly "operating" grant is now a subsidy before the auditor explains it.
Simplify Your Financial Management
GASB 103 is the first overhaul of the government reporting model in a generation. Beancount-style plain-text ledgers that tag each revenue posting by subsidy type make the reclassification a ledger query, not a spreadsheet hunt — so the MD&A you write ties directly to the fund statements you publish. Get started for free and make the new model an improvement, not a scramble.