February Newsletter

GASB 101: Compensated Absences

For the upcoming audit year, school districts and municipalities should recognize liabilities for vacation and sick leave when it is earned and not, as previously, for the amount expected to be paid out on termination. For employers with unlimited PTO, a leave liability should be recognized when leave is taken. This Statement requires that a liability for certain types of compensated absences—including parental leave, military leave, and jury duty leave—not be recognized until the leave commences. This Statement also requires that a liability for specific types of compensated absences not be recognized until the leave is used. This Statement amends the existing requirement to disclose the gross increases and decreases in a liability for compensated absences to allow governments to disclose only the net change in the liability (as long as they identify it as a net change). In addition, governments are no longer required to disclose which governmental funds typically have been used to liquidate the liability for compensated absences. The requirements of this Statement are effective for fiscal years beginning after December 15, 2023, and all reporting periods thereafter.

GASB 102: Risk Disclosures

The requirements of this Statement will improve financial reporting by providing users of financial statements with essential information that currently is not often provided. The disclosures will provide users with timely information regarding certain concentrations or constraints and related events that have occurred or have begun to occur that make a government vulnerable to a substantial impact. As a result, users will have better information to understand and anticipate certain risks to a government’s financial condition. The requirements of this Statement are effective for fiscal years beginning after June 15, 2024, and all reporting periods thereafter.

GASB 103: Financial Reporting Model Improvements

For financial reporting periods beginning after June 15, 2025, certain required tables in the MD&A section will be combined and eliminated. The MD&A section of the financial statements will include discussion of demographic and economic factors. This Statement requires that the proprietary fund statement of revenues, expenses, and changes in fund net position continue to distinguish between operating and nonoperating revenues and expenses. Operating revenues and expenses are defined as revenues and expenses other than nonoperating revenues and expenses. Nonoperating revenues and expenses are defined as: (1) subsidies received and provided; (2) contributions to permanent and term endowments; (3) revenues and expenses related to financing; (4) resources from the disposal of capital assets and inventory; and (5) investment income and expenses. This Statement requires governments to present each major component unit separately in the reporting entity’s statement of net position and statement of activities if it does not reduce the readability of the statements. This Statement requires governments to present budgetary comparison information using a single method of communication—RSI. Governments also are required to present: (1) variances between original and final budget amounts; and (2) variances between final budget and actual amounts. An explanation of significant variances is required to be presented in notes to RSI.

GASB 104: Disclosures about Capital Assets

For financial reporting periods beginning after June 15, 2025, lease assets will be shown in greater category detail by on the financial statements. Infrastructure assets like roads, bridges, tunnels, drainage and water systems, dams, and communications networks will be subject to impairment testing every three years. Infrastructure that does not reach the minimum standard for infrastructure set out in the rules should have its value on the balance sheet be reduced. Further information about this new standard will be discussed as we get closer to implementation. 

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