GASB Statement No. 103, Financial Reporting Model Improvements, is effective for fiscal years beginning after June 15, 2025, making it an important consideration for governments preparing their FY2026 financial statements.

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The new standard does not replace the governmental financial reporting model. Instead, it focuses on improving several key areas of existing financial statements, including Management’s Discussion and Analysis (MD&A), unusual or infrequent items, proprietary fund financial statements, major component unit information, budgetary comparisons, and certain statistical information.

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One of the most visible changes will be to MD&A. GASB 103 is intended to make this section more focused and useful to financial statement users. Governments should expect to revisit existing MD&A templates rather than simply carrying forward prior-year language.

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The standard also provides additional guidance for distinguishing operating and nonoperating revenues and expenses in proprietary funds, which may affect how water, sewer, and other enterprise fund activity is presented.

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For municipalities and school districts, the best time to address these changes is before year-end financial statement preparation begins. Reviewing current financial statement templates, identifying areas affected by GASB 103, and discussing implementation with your auditor can help make the transition more efficient.