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Updates to Management Discussion and Analysis (MD&A) from GASB 103

Updates to Management Discussion and Analysis (MD&A) from GASB 103

Key Takeaways

  • GASB 103 modernizes key elements of governmental financial reporting to enhance clarity, comparability and decision-making.
  • Amongst the changes are significant revisions to the Management Discussion and Analysis (MD&A) section for state and local governments.
  • MD&A now follows a five-section format designed to highlight key financial drivers.
  • The standard is effective for fiscal years beginning after June 15, 2025, with early adoption encouraged.
  • Governments should begin preparing now to align their reporting and review processes.

GASB 103: Financial Reporting Model Improvements

In May 2024, the Governmental Accounting Standards Board (GASB) issued Statement No. 103, Financial Reporting Model Improvements. This standard is the most significant update to governmental financial reporting models since Statement No. 34, issued more than 20 years ago.

GASB 103 is designed to enhance the effectiveness of communication in financial reporting by improving the structure, clarity and decision-making effectiveness of financial statements and budgetary information for state and local governments.

Among the revisions to GASB 103 are significant changes to the Management Discussion and Analysis (MD&A) for state and local governments.

What are the Key Changes to the MD&A?

Five Sections vs. Eight Sections

Under GASB 103, the MD&A is organized into five sections instead of eight:

  1. Overview of the Financial Statements
  2. Financial Summary
  3. Detailed Analyses
  4. Significant Capital Asset and Long-Term Financing Activity
  5. Currently Known Facts, Decisions or Conditions

This format provides a clear roadmap for readers and improves comparability among governments. The intent is to keep the MD&A concise, focused and aligned with the information readers of the financial statement would value.

More Analysis, Less Repetition

The MD&A should explain the reasons behind financial results, not simply restate them. Governments are encouraged to describe major drivers of change, such as shifts in revenue, spending or capital activity, so users can better interpret financial performance.

Streamlined and Relevant Content

Only information that directly supports one of the five required sections should be included in the MD&A. Background narrative or duplicated financial data can be moved to other parts of the report, such as the transmittal letter, improving readability and focus.

Expanded Capital and Long-Term Financing Discussion

GASB 103 introduces a dedicated section for significant capital asset and long-term financing activity. This provides transparency into major projects, new debt issuances or policy decisions that affect financial stability.

Forward-Looking Perspective

The revised MD&A should highlight currently known facts, decisions or conditions expected to have a significant impact on future results. This approach brings a more analytical, forward-thinking tone to the discussion.

What are the Next Steps to Prepare for Implementation?

GASB 103 is effective for fiscal years beginning after June 15, 2025. The new MD&A requirements apply prospectively, and state and local governments will not need to restate the prior period for comparative purposes.

Though early adoption is not necessary, early and deliberate implementation planning will position government entities to comply with these changes effectively and enhance the overall quality of financial reporting.

To prepare for these changes, governments should consider the following steps:

  • Review existing MD&A content for length, redundancy and clarity.
  • Reorganize material into the five-section structure.
  • Focus on explanatory and analytical writing.
  • Update internal templates and reporting timelines.
  • Coordinate with auditors and governing bodies on presentation expectations.

Beyond Compliance

The updates to MD&A reflect a broader effort by GASB to make governmental financial reports more useful and transparent. By refining how financial results are discussed, state and local governments can offer stakeholders a clearer view of fiscal performance and decision-making.

At Brown Plus, we work closely with state and local governments to navigate evolving GASB standards, evaluate operational impacts and develop structured implementation strategies tailored to your unique reporting environment.

If your organization needs support with GASB 103, contact Brown Plus to speak with one of our advisors.

Posted In: Attest | Audit | Governmental Entities | Insights

About the Author - Scott Henry, CPA, MBA

Scott is an Audit Principal with Brown Plus with over 12 years of public accounting experience. Scott specializes in providing audit and review services to governmental entities (including local governments and authorities, school districts and more), as well as nonprofit organizations, including public charter schools.

Scott is primarily responsible for the planning, fieldwork, supervision of audit staff and wrap-up of the audits and review services that he provides. He works closely with our clients to establish and perpetuate meaningful relationships, and he is driven by helping small to medium-sized organizations reach their financial goals.

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