GASB 100: Accounting Changes and Error Corrections - An Overview

The Governmental Accounting Standards Board (GASB) reached triple digits with the issuance of GASB #100, Accounting Changes and Error Corrections (An Amendment of GASB Statement No. 62). We have a summary of this statement, how it will affect your organization’s financial reporting, and how you can prepare for implementation.

What is the objective of GASB 100?

The objective of GASB 100 is to improve the reporting requirements for accounting changes and error corrections with the goal of providing clearer and more reliable information to better inform an organization’s decision making while providing clarity to the users of financial statements. Accounting changes are defined as changes in accounting principles, changes in accounting estimates, and changes to the financial reporting of the entity with a description of the events or transactions constituting those changes. Any changes as defined in GASB 100 should be justified on the basis that it is preferable to the principle or methodology used prior to the change.

What does GASB 100 now require?

GASB 100 requires that:

• Changes in accounting principles should be reported retroactively by restating in a single period the new beginning position for the cumulative effect. For comparative financial statements, restate the beginning position of the first period presented for any cumulative effect, if practicable. For changes in accounting principles that do not affect the beginning position, but require reclassification, disclose the nature of the change and for comparative financial statements, reclassify for all prior periods presented, if practicable
• Changes to or within the financial reporting entity should be reported by adjusting the beginning balances of the current period.
• Changes in accounting estimates should be reported prospectively by recognizing the change in the current period.
• When it’s necessary to disclose corrections of errors due to errors in previously issued financial statements, this disclosure should be reported retroactively. For a single period, the beginning position should be restated for the cumulative effect. For comparative financial statements, the financial statements should be restated for all periods presented with the beginning position restated for the first period along with any cumulative effect. For error corrections that do not affect beginning position, but require reclassification, disclose the nature of the change. For comparative financial statements, reclassify for all prior periods presented, if practicable.
• The aggregate amount of adjustments to and restatements of beginning net position, fund balance, or fund net position, as applicable, are to be displayed by reporting unit in the financial statements.
• For the notes to the financial statements, there must be a disclosure of details regarding the nature of and reason for the accounting changes and error corrections. Disclosure regarding the quantitative effects on the beginning balances of each accounting change and error correction are to be included by reporting unit in a tabular format to reconcile the original beginning balances previously reported to the restated and new beginning balances.
• Additional information affected by changes in accounting principles or error corrections are to be included in the Required Supplementary Information (RSI) and Supplementary Information (SI). For earlier periods than those included in the basic financial statements, if it is practicable, information presented in the RSI or SI should be restated for error corrections but not for changes in accounting principles or changes to or within the financial reporting entity.

When determining the applicability of GASB 100, it is important to understand what scenarios would require these new disclosure requirements.

• For changes in accounting principles this could include a change from one accepted Generally Accepted Accounting Principle (GAAP) to another or the implementation of a new GASB. The new principle preferably would be based on improved understandability, reliability, relevance, timeliness, consistency, and comparability.
• For changes in accounting estimates, this could include changes to the inputs used for an estimate or result from a change in circumstances, new information, or more experience, with the change in measurement methodology being preferable. Specific guidance on estimates should be referred to.
• For changes to or within the reporting entity, this would be applicable for organizations where a component unit is added or removed, or a component unit has a change in presentation between blended and discretely presented. Reporting entity changes also apply when a fund is added or removed, resulting from the movement of continuing operations or a fund is re-classified between major and non-major.

When is GASB 100 effective?

GASB 100 will be effective for accounting changes and error corrections made in fiscal years beginning after June 15, 2023, and all reporting periods thereafter. Earlier application is encouraged.

What Should Your Organization Do to Prepare for GASB 100?

The good news for your organization regarding the implementation of GASB 100 is that in contrast to other recent pronouncements, such as GASB 87 and 96, this statement is fairly straight forward to implement.  However, you will need to identify the following circumstances and consult with your audit team on the new disclosure requirements.

• Did your organization implement a new GASB pronouncement in the current reporting period?
• Were there any error corrections that affected the years prior to those in the current reporting period? A member of your audit team can assist you with disclosing those corrections in the RSI or SI schedules if necessary.
• Were there any changes in accounting estimates in the current reporting period?
• Did your organization make any changes to how it is structured as a reporting entity?
• Were there any changes in major and nonmajor fund presentation?

If you have any questions regarding GASB 100 please contact us.