How to Address Accounting Changes and Errors with GASB 100

Does your government ever have accounting changes or error corrections? If yes, know that GASB 100, Accounting Changes and Error Corrections is effective for years ending June 30, 2024.
In a perfect world, a government would never change its accounting methods or presentation of funds and would have no errors. But we donโt live in such a place, do we? Given that governments change their accounting and suffer errors, GASB 100 is here to help ensure that a government’s financial story flows well and is understandable.
GASB 100 addresses changes to accounting and error correction as follows:
- Changes in accounting principles
- Changes in accounting estimates
- Changes to or within financial reporting entities
- Error corrections
Below, I cover each of these, but first, let’s see why GASB created this standard.
Reasons for GASB 100
So, why did GASB create this standard?
GASB desires greater consistency in how governments account for these changes and corrections. This standard provides well-defined accounting change and error correction classifications, making it easier to follow.
It also provides more precise definitions for changes in accounting principles, estimates, and reporting entities, so itโs easier to understand than previous guidance.
Finally, it requires detailed, tabular reconciliations in financial statements and enhanced note disclosures, ensuring stakeholders understand the changesโ quantitative and qualitative impacts.โ
Now, letโs look at changes in accounting principles, the first of the four areas addressed in GASB 100.
1. Changes in Accounting Principles
Changes in accounting principles refer to adopting a new accounting principle that replaces one previously used. According to GASB Statement No. 100, such changes can arise under two main circumstances:
- Voluntary Change to a Preferable Principle: The first occurs when an entity opts to change from one generally accepted accounting principle (GAAP) to another, provided that the new principle is justifiably preferable based on the qualitative characteristics of financial reporting, such as relevance, reliability, understandability, and consistency.
- Adoption of New Authoritative Guidance: The second occurs when a government adopts a new GASB pronouncement (e.g., GASB 87, leases) that mandates the use of a specific principle requiring a change in accounting principle.
Reporting Requirements for Changes in Accounting Principles
The financial reporting requirements depend on the context:
- Retroactive Application: If practicable, restate prior financial statements to reflect the new principle as though the government had always applied it (restate the beginning net position, fund balance, or fund net position for the prior comparative year). Why? To ensure comparability and consistency. If it is not practicable to restate the earlier periods, disclose why. If the government presents a single-year presentation, restate the beginning net position, fund balance, or fund net position, as applicable.
- Disclosure: The notes to the financial statements must explain:
- The nature of the change
- The reason for the change, explaining why the new principle is preferable (unless the change is due to a new pronouncement)
- Identification of the new standard implemented (e.g., GASB 87, Leases), if applicable
- The financial statement line items affected by the change (excluding totals or subtotals)
- Quantitative effects (a tabular reconciliation) on beginning net position, fund balance, or fund net position, as applicable
Each reporting unit (each separate column in the financial statements) must present the aggregate adjustments or restatements of the beginning net position, fund balance, or fund net position in the financial statements. So, disclose the effects on the beginning net position, fund balance, or fund net position if there is more than one restatement for a column in the financial statements; the aggregate amount on the face of the financial statements doesnโt provide enough detail. The government is not required to disclose the effects on the beginning net position, fund balance, or fund net position if the government separately displays the impact of each accounting change on the face of the financial statements.
Financial Statement Display for Change in Accounting Principle
Suppose multiple GASB 100 changes affect equity (e.g., a change in accounting principle and an error correction). In that case, the government can show the aggregate amount of the two changes on the face of the financial statement and disclose the effects of each change.
But suppose a change in accounting principle solely affects beginning equity. In that case, the government can display the change on the face of the financial statement (and not disclose the tabular reconciliation) as follows:
If the government presents fund-level financial statements, each affected column will show a similar display.
Example Disclosure for Change in Accounting Principle
Hereโs an example of a change in accounting principle disclosure. (This example addresses only the change in accounting principle and does not address the GASB 87 requirements.)
Changes in Accounting Principle
The City of Sanford implemented GASB 87, Leases, for fiscal year 2022. It now recognizes lease liabilities and assets not previously shown in the financial statements. The City recognizes an intangible right-to-use asset and lease liability for leases over one year.
The implementation of GASB 87 resulted in adjustments to the beginning net position as follows:
If the government presents fund-level financial statements, it will provide similar disclosures for each affected fund. GASB 100 requires a tabular format that reconciles the previously reported beginning balances to adjusted or restated beginning balances. If the government presents individual changes on the face of the financial statements (not in the aggregate), tabular disclosure is not required.
See Appendix C of GASB 100 for example tabular disclosures.
See GFOA’s downloadable GASB 100 spreadsheet for illustrations.
Now, letโs look at changes in estimates.
2. Changes in Estimates
Accounting estimates are those numbers or disclosures subject to measurement uncertainty.
Here are some examples of estimates in governmental entities:
- Depreciation of capital assets
- Allowance for uncollectible accounts
- Actuarial estimates for pensions or OPEB
- Self-insurance claims
- Landfill closure and postclosure costs
- The useful life of intangible assets
- Investment fair value for complex investment instruments
These estimates are the result of inputs such as assumptions and measurement methods. A change in an accounting estimate occurs when an input changes, such as the following:
- A change in circumstance,
- New information, or
- More experience
An estimate can also change due to a change in method, such as changing from straight-line depreciation to accelerated. Governments can make such changes only if they are preferableโthat is, if they create greater understandability, reliability, relevance, timeliness, consistency, or comparability.
Financial Statement Reporting for Change in Estimates
Report all changes in estimates prospectively. There are no restatements of prior financial statements for such changes.
Disclose the following:
- The nature of the change in the accounting estimate,
- The financial statement line items affected (excluding totals and subtotals)
- If from a change in measurement methodology:
- the reason for the change, and
- an explanation of why the new method is preferable (unless a GASB pronouncement requires the change)
A change in method–because it is preferable–is not considered an error correction. (See B11 of GASB 100 for more about this.)
What is the difference between an error and a change in accounting estimate?
An error (see below) occurs when a government should have known facts that existed when it issued the financial statements.
A change in accounting estimate stems from new developments such as changes in circumstances, new information, or more experiences.
Example Disclosure for Change in Estimate
Here is an example disclosure for a change in estimate.
Note X: Change in Accounting Estimate
Nature of the Change
During the fiscal year ending June 30, 2025, the City of Samson revised the method used to estimate depreciation for its fleet of vehicles. Previously, the City utilized the straight-line method to calculate depreciation. Based on a reassessment of vehicle usage patterns, the City determined that the units-of-production method, based on total miles driven, better reflects the actual wear and tear on the vehicles.
Justification for the Change
The change in depreciation methodology provides a more accurate allocation of the vehiclesโ costs over their useful lives. This adjustment ensures financial reporting aligns with the qualitative characteristics of reliability, relevance, and comparability outlined by GASB.
Impact of the Change
The change in methodology resulted in an increase in depreciation expense of $150,000 for the fiscal year ending June 30, 2025, compared to what would have been recognized under the prior method. Future periods will also reflect changes in depreciation expense based on actual miles driven.
Disclosure of Affected Line Items
The financial statement line items affected by this change in accounting estimate are as follows:
- Depreciation Expense: Increased by $150,000
- Accumulated Depreciation: Increased by $150,000
The City applied this change prospectively and did not restate prior period financial statements.
Next, we’ll see how to account for changes to or within financial reporting entities.
3. Changes to or within financial reporting entities
Sometimes, governments rearrange their financial reporting. For example, a government might eliminate a discretely presented component unit and place that activity in its general fund. GASB 100 tells you how to present and disclose this change so a financial statement reader understands what happened. If the government presents comparative statements, the prior year will not be restated for reporting entity changes. Adjustments are made to the current period’s beginning balances instead (see below).
A change to or within a reporting entity can result from various scenarios, such as the following:
- Addition or Removal of a Fund occurs when a fund is added or removed due to the movement of continuing operations within the primary government, including its blended component units.
- Change in Fund Presentation occurs when a fund is reclassified from major to nonmajor or vice versa. Such a change is a change within the reporting entity.
- Addition or Removal of a Component Unit occurs when adding or removing a component unit from the financial reporting entity (exceptions include acquisitions, mergers, or transfers of operations (as defined by GASB 69) that result in the addition or removal of a discretely presented component unit).
- Change in Component Unit Presentation occurs when a government changes how a component unit is presented, such as from blended to discretely presented. This is a change within the financial reporting entity.
Adding a new fund for new activity is not subject to GASB 100. Likewise, removing a fund is not subject to the standard if a government discontinues providing the service (e.g., transit).
A change in a reporting entity includes a government presenting a fund one way in one year (e.g., blended component unit) and another in a subsequent year (e.g., discretely presented component unit). Another example is the movement of a blended component unit to the general fund. Present such changes as though they occurred on the first day of the year.
So, the reclassified fund’s revenues and expenses/expenditures will be $0 (called ghost columns) for the year presented. The face of the financial statement shows the decrease of the reclassified fund’s fund balance or net position to $0. Concurrently, the other fund’s balance or net position increases by the amount of the reclassified fund’s fund balance or net position. (See example below.)
Financial Statement Reporting for Changes To or Within the Financial Reporting Entity
Present the aggregate amount of adjustments to and restatements of net position, fund balance, or fund net position on the face of the financial statement for each reporting unit (a column in the financial statements is a reporting unit, excluding total columns). While the aggregate amount of adjustments and restatements is required, individual amounts can be provided. For example, if a government has a correction of an error and a change within the financial reporting entity, they can be shown separately on the face of the financial statement.
If a nonmajor governmental fund becomes a major fund, present the major fund as though the change occurred at the beginning of the reporting period. In other words, the new major fund balance sheet will reflect all balances as of the end of the year, and the statement of revenues, expenditures, and changes in fund balance will reflect all revenues and expenditures for the year. No revenues or expenditures will appear in the nonmajor fund column (the government does present the nonmajor column but the only numbers in the statement of revenues, expenditures, and changes in fund balance are the prior fund balance on one line and a separate line for the amount being reclassed to the major fund; all other numbers will be $0 in the nonmajor balance sheet and the statement of revenues, expenditures, and changes in fund balance). The new major fund statement of revenues, expenditures, and changes in fund balance shows a line with a beginning fund balance of $0; the following line is the fund balance brought from the nonmajor fund; and the next line is fund balance, as adjusted. Here’s an example (showing one column from the governmental funds statement):
Disclose the following:
- Describe the nature of the change (addition, removal, or reclassification of a fund or component unit)
- Describe the reason for the change (exception–when the change is the result of quantitative threshold test for major funds)
- Disclose the quantitative effects of the adjustments to the beginning net position, fund balance, or fund net position for affected funds or component units, presented in a tabular format (not required if the government presents the quantitative effects on the face of the financial statements, provided the quantitative effects are shown individually and not in the aggregate)
Example Disclosure for Changes To or Within the Financial Reporting Entity
Here’s a sample disclosure for a nonmajor fund that becomes a major fund.
Sample City โ Notes to the Financial Statements
For the Year Ended June 30, 2024
Note X โ Changes within the Financial Reporting Entity
Change in Presentation:
During fiscal year 2024, the Special Purpose Sales Tax fund was reclassified from nonmajor to a major fund due to significant increases in its revenues, expenditures, and assets.
See Appendix C of GASB 100 for example tabular disclosures.
See GFOA’s downloadable GASB 100 spreadsheet for illustrations.
Lastly, let’s look at errors in financial statements.
4. Error Corrections
Errors result from the following:
- Mathematical mistakes (e.g., depreciation calculation error)
- Mistakes in the application of accounting principles (e.g., not applying GASB 87, Leases, correctly), or
- Oversight or misuse of facts that existed at the time the financial statements were issued (e.g., not accruing material liabilities for services received)
The steps for correcting an error are as follows:
- Identify the type of error
- Restate the financial statements (retroactively if comparative statement; beginning net position, fund balance, or fund net position if single-period)
- Disclose in the notes
If the correction does not affect net position or fund balance, present the appropriate reclassification and disclose the change and the line items affected.
Financial Statement Reporting for Errors
If a single-year presentation is provided by the government, beginning net position, fund balance, or fund net position should be corrected for the cumulative effect of the errors in the prior periods. Present the corrections retroactively if comparative statements are provided. Such corrections should not be titled prior period adjustments.
Show the prior net position or fund balance on the face of the financial statements and a separate line for the error correction. Thereafter, present the net position or fund balance, as restated. GASB 100 requires such a presentation. In other words, a government can’t just present a line such as Net Position, as Restated. It must present the Net Position, as Previously Presented on the face of the financial statement.
Here’s an example in a statement of activities’ governmental activities column:
Disclose the following:
- The nature of the error
- The periods affected by the error
- Identification of the line items affected by the error (excluding totals and subtotals)
- For single-year presentations, the effect of the error on the prior period’s change in net position, fund balance, or fund net position
- For comparative statements, the effect of the error on the prior period’s change in net position, fund balance, or fund net position
- A tabular presentation showing the reconciliation of beginning net position, fund balance, or fund net position as previously reported to the amounts as restated for each reporting unit (each column excluding totals columns) — see Appendix C of GASB 100 for an illustration
See GFOA’s downloadable GASB 100 spreadsheet for illustrations.
Notes to the Financial Statements
Note X โ Correction of an Error
The City of Sample capitalized repair expenses as capital assets in the prior period. Those amounts should have been expensed in the government wide presentation. The result was capital assets were overstated by $147,118 and Public Works expenses were understated by the same amount.
Required Supplementary Information (RSI) and Supplementary Information (SI) – Errors
Information in RSI and SI affected by an error should be restated for all periods presented in the basic financial statements. Additionally, if the error affects periods earlier than those in the financial statements, they should be corrected, if practicable. If restatement is not practicable, the government should disclose in the RSI or SI that the information was not restated and provide the reason why restatement is not practicable.
Regarding changes in accounting principles and changes to or within the financial reporting entity, the RSI and SI information should align with changes in the basic financial statements for the periods presented. The RSI and SI reporting period information should be restated in the same manner as the financial statements. But what about RSI and SI that contains reporting periods that precede those presented in the basic financial statements? Should those years be restated for a change in accounting principles or within the financial reporting entity? No, such amounts should not be restated.
Summary of GASB 100, Accounting Changes and Error Corrections
GASB 100 provides a consistent framework for reporting accounting changes and error corrections. This standard helps governments tell their stories clearly.