Understanding GASB 100: Clarifying Accounting Changes and Errors

The Governmental Accounting Standards Board (GASB) establishes reporting standards for state and federal government organizations. GASB 100 works to amend GASB Statement 62. After reexamining, the Board replaced the previous guidance with new accounting changes and error corrections standards. 

GASB 100 clarifies accounting and financial requirements and focuses on providing reliable, relevant, consistent, and comparable information for more informed decision-making and accountability. Implementing these changes can help entities improve transparency and reliability, making it imperative that organizations take the necessary steps to implement the GASB 100 changes effectively. This statement is effective for accounting changes and error corrections made in fiscal years beginning after June 15, 2023, and all future reporting periods.  

Key Provisions of GASB 100 

Much of the accounting has not changed from previous guidance under Statement No. 62; however, the new standard adopts the guidance to present-day governmental reporting. It clarifies presentation and disclosure requirements, including those for the management discussion and analysis, required supplementary information (RSI), Supplementary Information (SI), and other information. 

The new standard defines each type of accounting change and explains the impact of accounting and reporting to illuminate how the accounting change affects the financial statements. When applying the standard, preparers must understand how to properly account for the new standard’s four types of accounting changes. 

Change in Accounting Principles 

GASB 100 defines a change in accounting principles as a change from one generally accepted accounting principle to another that is justified because the newly adapted principle is preferable to the previous one. These changes are applied retroactively to all prior periods presented unless they fall under another adopted standard. 

Implementing GASB statement 101, Accounting for Compensated Absences in Governmental Entities, would be an example of such a change, as it requires the liabilities presented on the statement of net position to be adjusted for all periods presented. 

Changes in Accounting Estimates  

A change in accounting estimates is a change in an accounting estimate resulting from changes to the estimate’s input. An input results from changes in circumstances, information, or experience, whereas outputs are derived from accounting estimates. Outputs must be recognized or disclosed in basic financial statements; e.g., a change in the depreciable lives used to depreciate capital assets is a change in accounting estimates. 

Changes in Reporting Entity 

A change in reporting entity can result from:  

• The addition or removal of funds results in the movement of continuing operations within the primary government, including its blending component units.  
• A change in the fund’s presentation as a major or nonmajor. 
• Adding a component unit to the financial reporting entity or removing a component unit from the financial reporting entity. 
• A change in a component unity’s presentation as blended or discretely presented. 

It is important to note that acquisitions, mergers, and operation transfers that add or remove a discretely presented component unit are not considered changes in reporting entities. 

These changes must be presented and reported in the current reporting period’s beginning net position, fund balance, or fund net position for changes occurring at the beginning of the reporting period. 

Errors 

GASB 100 defines an error as a mathematical mistake, an accounting principle application mistake, or the oversight or misuse of facts that existed in the financial statement. 

Applying GASB 100 

The first step in applying GASB 100 is to determine the type of change based on the above definition. The diagram below illustrates the accounting treatment for each type of change. 

Accounting for Accounting Changes and Error Corrections 

Implementation and Compliance 

The impacts of GASB 100 can add significant time when preparing a financial report that accurately accounts for changes in which they occurred. Implementing these changes can be challenging, as accounting processes vary under new standards. For instance, situations that now qualify as a change in the reporting entity did not previously require significant disclosure and presentation changes; however, now, more detailed information is needed.   

Challenges and Considerations  

Implementing GASB 100 comes with several potential challenges, as identifying changes, errors, or corrections within financial statements can be complex and require professional judgment. While some governmental organizations rarely apply this standard, all must implement it, allowing for transparent and consistent reporting. 

While elements of GASB 100 may have significant hurdles,EisnerAmper’s government industry professionals have the knowledge and resources to work through your everyday or complex situations. Contact us below to learn how we can help your organization.