GASB 102 Introduces New Risk Disclosure Rules
State and local governments are facing growing expectations around transparency and financial risk awareness. GASB Statement No. 102, Certain Risk Disclosures, responds to that need by requiring governments to disclose specific vulnerabilities that could have a substantial impact on their financial position. The standard is effective for fiscal years beginning after June 15, 2024, making it a current priority for many governmental entities.
While GASB 102 does not change accounting measurements, it does require governments to take a closer look at financial dependencies and limitations that may not have been clearly communicated in the past.
What Is GASB Statement 102?
GASB Statement 102 establishes disclosure requirements related to financial risks arising from concentrations and constraints. These disclosures are intended to help financial statement users better understand conditions that could significantly affect a government’s ability to continue providing services or meet its financial obligations.
The focus of the standard is on risks that already exist at the financial statement date and that are known to management. It does not require governments to predict future events, but it does require them to be transparent about identifiable vulnerabilities.
Disclosures Related to Concentrations
Concentrations refer to situations where a government is heavily reliant on a limited number of sources. GASB 102 requires disclosure evaluation when a concentration makes the government vulnerable to the risk of a substantial impact.
Examples of concentrations may include reliance on a small number of major taxpayers, a single employer that drives local economic activity, a limited number of revenue sources, or significant federal or state funding streams. When such concentrations exist, governments must describe the nature of the concentration and the related risk exposure.
Disclosures Related to Constraints
Constraints are limitations that restrict a government’s ability to access or use resources. These may be imposed by external parties, legislation, or contractual arrangements.
Examples include legal or regulatory restrictions on spending, debt limitations, voter-approved constraints, or restrictions tied to grants and other funding sources. If these constraints create a vulnerability that could substantially affect financial operations, disclosure is required.
Financial Reporting
When do I need to change my financials?
GASB 102 disclosure is required only if all three criteria are met:
The concentration or constraint is known prior to the issuance of financial statements.
It makes the reporting unit vulnerable to a substantial impact.
An associated event has occurred, begun to occur, or is more likely than not to occur within 12 months of the issuance date.
It is important to note that if the government takes action before issuance that fully removes one of the three criteria, disclosure is no longer required.
What Local Governments Should Be Doing Now
Because GASB 102 is already effective, governments should be actively evaluating whether significant concentrations or constraints exist. This process often requires collaboration between finance teams, leadership, and legal or operational personnel to ensure risks are properly identified and described.
Governments should also consider how these disclosures align with other narrative reporting, such as management’s discussion and analysis, to ensure consistency and clarity for financial statement users.
How CSH Can Help with GASB Standards
CSH works with state and local governments to interpret and implement new GASB standards in a practical, compliant manner. Our government accounting professionals can help identify reportable concentrations and constraints, evaluate disclosure requirements, and ensure financial statements meet current GASB expectations.
Whether you need assistance assessing risk exposures, drafting compliant disclosures, or navigating broader accounting and reporting challenges, CSH’s government expertise and accounting and tax services are here to help. Contact our team to learn how we can support your organization in meeting GASB 102 requirements with confidence and clarity.
