Submitted by Anthony Brunson P.A. Certified Public Accountants & Business Advisors
As state and local governments move through 2026 financial reporting cycles, GASB Statement No. 103 is no longer just on the horizon, it is here. Effective for fiscal years beginning after June 15, 2025, the standard now applies to June 30, 2026 year ends, making this the first widespread implementation year for many governments.
This update represents the culmination of a multi-year reexamination of the reporting model originally established under GASB Statement No. 34. While not a complete overhaul, Statement 103 introduces meaningful changes to presentation and disclosures aimed at improving clarity, consistency, and decision-usefulness.
Below is a practical, implementation-focused overview of what matters most right now.
Management’s Discussion and Analysis (MD&A)
One of the most significant changes affects MD&A. While it remains required supplementary information (RSI), its structure is now more defined and its expectations more rigorous. MD&A must be organized into five required sections:
- Overview of the financial statements
- Financial summary
- Detailed analyses
- Significant capital asset and long-term financing activity
- Currently known facts, decisions, or conditions
In practice, early implementations in 2026 are showing a clear shift away from boilerplate language. Regulators and auditors are expecting governments to go beyond reporting changes and instead explain the underlying drivers. MD&A should function more like an executive briefing, focused, analytical, and forward-looking.
Unusual or infrequent items
Statement 103 eliminates the categories of “extraordinary” and “special” items. Instead, governments must report unusual or infrequent transactions or events.
For 2026 reporting, a key implementation focus is presentation:
- Report inflows and outflows separately and on a gross basis
- Present as the final flow(s) before the net change in resource flows
- Apply across government-wide, governmental fund, and proprietary fund statements
This change enhances comparability across governments and improves visibility into one-time or nonrecurring activities, something stakeholders increasingly expect in the current environment.
Proprietary fund statement
For business-type activities (BTAs), Statement 103 introduces a clearer and more consistent framework for distinguishing operating and nonoperating revenues and expenses.
Nonoperating items now explicitly include:
- Subsidies (with noncapital subsidies presented separately)
- Contributions to endowments
- Financing-related revenues and expenses
- Gains/losses from disposal of capital assets and inventory
- Investment income and expenses
As governments implement this in 2026, many are finding that revenue and expense classifications require reevaluation, particularly for utilities, healthcare entities, and higher education institutions with diverse funding sources.
Major component unit information
Governments are now required to present each major component unit separately in the statement of net position and statement of activities, unless doing so reduces readability.
If separate presentation becomes impractical, combining statements should be presented after the fund financial statements. Early adopters are carefully balancing transparency with usability, especially where multiple component units exist.
Budgetary comparison information
Statement 103 standardizes how budgetary comparison information is presented:
- Must be reported as RSI using a single method
- Must include:
- Variances between original and final budgets
- Variances between final budget and actual results
Additionally, governments must explain significant variances in the RSI notes. For 2026, this is driving closer coordination between finance teams and budget offices to ensure accurate and meaningful variance analysis.
Final thoughts
GASB Statement No. 103 reflects a broader shift toward clearer financial storytelling and enhanced transparency. Now that implementation is underway, the focus has moved from awareness to execution.
Governments should be actively:
- Updating MD&A templates and drafting approaches
- Reassessing revenue and expense classifications
- Evaluating presentation of unusual or infrequent items
- Enhancing budget-to-actual variance analysis
With auditors now reviewing first-year implementations, early preparation and thoughtful application are critical to avoiding surprises.
If your government is still refining its approach or encountering implementation challenges, now is the time to address them, before reporting deadlines tighten.