GASB 102: Achieving compliance with new governmental risk disclosure requirements

The new disclosures required by Governmental Accounting Standards Board (GASB) statement no. 102, certain risk disclosures are applicable to financial statements for the year ended June 30, 2025, and after. While this standard didn’t make changes to the day-to-day accounting for governments, the effort required to ensure complete and compliant disclosure within the footnotes to the financial statements should not be overlooked. 

The goal of these disclosures is to provide the reader-specific information related to events that have occurred (or are more likely than not to occur) within the specified time frame which makes the government vulnerable to a substantial impact as the result of an existing concentration or constraint. This standard does not require boilerplate or generic disclosures within the footnotes—rather management must complete, and the auditor must examine the annual evaluation of the facts and circumstances at play. 

Let’s start with some key definitions provided by GASB within the standard.

• Concentration: A lack of diversity related to an aspect of a significant inflow or outflow of resources
• Constraint: A limitation imposed by an external party or by formal action of the highest level of decision-making authority within the government
• Substantial: Greater than significant but includes both quantitative and qualitative judgment

GASB outlined the time frame for the evaluation of triggering events to include events that have occurred, have begun to occur, or are more likely than not to begin to occur within 12 months from the date the financial statements are available to be issued. That date is generally considered to be the date of the audit opinion. GASB clarified that “more likely than not” is intended to mean a greater than 50% chance.

The standard provides several examples of potential concentrations or constraints as well as related events and illustrates the evaluation and disclosures for each. Nevertheless, it’s not possible for GASB or any other body to provide a comprehensive list of items to consider. As such, management within each organization will need to contemplate the circumstances that exist for their government and walk through the evaluation.