What Is GASB 34? Statements, Infrastructure, and GASB 103

GASB 34 is the financial reporting standard issued by the Governmental Accounting Standards Board in June 1999 that reshaped how state and local governments present their finances. It kept the traditional fund statements governments already prepared and layered on top of them a new set of government-wide statements built on full accrual accounting, giving readers a long-term economic view of the entity alongside the short-term budgetary view. It also forced governments to put roads, bridges, water systems, and other infrastructure on the balance sheet for the first time.¹

One caveat before going further. For fiscal years beginning after June 15, 2025, GASB Statement No. 103 replaces significant portions of GASB 34. The dual-layer structure below still applies, but some presentation details, the MD&A format, and budgetary comparison rules have changed. Those changes are covered at the end.²

What GASB 34 Changed

Before this standard, a city or county might own billions of dollars in roads, bridges, and water systems and show none of them on a financial statement. Governments reported only what came in and went out during the current budget period. That answered whether the government had stayed within its appropriations, but it told citizens and creditors almost nothing about overall financial health. GASB 34 required governments to keep producing those fund-level statements and add a second layer, the government-wide statements, that captures the full economic picture including capital assets and long-term debt.

The Two Measurement Approaches

Governmental accounting has to track two very different things at once: whether money was spent according to legal restrictions this year, and whether the government’s overall financial position improved or deteriorated over time. GASB 34 uses a different measurement approach for each.

Full Accrual for Government-Wide Statements

The government-wide statements use the economic resources measurement focus with the full accrual basis. Revenues are recognized when earned and expenses when the underlying obligation occurs, regardless of when cash changes hands. All assets and liabilities appear on the statements, including long-term items like bond debt and capital assets. This produces the full economic cost of government services, including depreciation on buildings, vehicles, and infrastructure.¹

Modified Accrual for Governmental Funds

Governmental fund statements use the current financial resources measurement focus with the modified accrual basis. Revenues are recognized only when they are both measurable and available to pay current obligations. Long-term assets and long-term liabilities do not appear. The focus is narrow by design: it answers whether the government had enough resources this period to cover this period’s spending, which is what budget oversight requires. Proprietary funds and fiduciary funds use full accrual even at the fund level, because those activities operate more like businesses or hold assets for others.¹

What a GASB 34 Financial Report Contains

A complete report consists of Management’s Discussion and Analysis, the Basic Financial Statements, and Required Supplementary Information. The Basic Financial Statements themselves break into three parts: government-wide statements, fund statements, and notes.¹

Government-Wide Statements

These present a consolidated view of the entire government in two columns: governmental activities (services funded mostly by taxes and grants, like police, fire, and parks) and business-type activities (operations that charge fees to cover their costs, like water utilities and parking garages).

The Statement of Net Position functions like a balance sheet. It reports total assets, deferred outflows of resources, total liabilities, and deferred inflows of resources. The difference is net position, broken into net investment in capital assets, restricted, and unrestricted.¹

The Statement of Activities reports the net cost of each function. Rather than just listing total spending, it offsets each function’s expenses against the revenues that function directly generated, such as program-specific grants and charges for services. What remains is the cost covered by general revenues like property taxes. The format makes clear which programs are self-supporting and which rely on tax dollars.

Fund Statements

Fund-level reporting survived intact. Governmental funds such as the General Fund, special revenue funds, and debt service funds continue to use modified accrual. GASB 34 does require each “major” fund to be presented separately rather than aggregated. A fund is major if its assets, liabilities, revenues, or expenditures represent at least 10 percent of the total for all funds in that category (governmental or enterprise) and at least 5 percent of the combined total for all governmental and enterprise funds. The rest are combined in a single “other” column.

Notes

The notes are a full component of the basic financial statements. They cover significant accounting policies, capital asset and long-term debt details, pension obligations, and explanations of reconciling items between the fund and government-wide statements.¹

The Reconciliation

Because the two layers use different measurement approaches, their numbers won’t match. GASB 34 requires a reconciliation explaining every difference between the governmental fund totals and the governmental activities column in the government-wide statements. The biggest reconciling items are capital assets and long-term debt, which appear only in the government-wide layer. The reconciliation can appear on the face of the fund statements, in an accompanying schedule, or in the notes.

Management’s Discussion and Analysis

The MD&A is a narrative that must appear before the financial statements. It gives readers an accessible overview of financial performance for the year and is classified as Required Supplementary Information, though its placement gives it more prominence than most RSI. The MD&A must include an overview explaining how the statements relate to each other, analysis of overall financial position and results using the government-wide statements, discussion of significant changes from the prior year, analysis of major fund balances and transactions, a summary of capital asset and long-term debt activity, and a description of currently known facts expected to affect future finances.¹

Other Required Supplementary Information

Beyond the MD&A, GASB 34 requires budgetary comparison schedules as RSI for the general fund and each major special revenue fund with a legally adopted budget. These schedules show the original budget, the final amended budget, and actual results. Governments using the modified approach for infrastructure also present their condition assessment schedules as RSI.

Reporting Infrastructure Assets

One of the most consequential parts of GASB 34 is the requirement to capitalize and report major general infrastructure. Infrastructure means long-lived, stationary assets like roads, bridges, tunnels, water and sewer systems, dams, and drainage systems. Before the standard, most governments expensed these when built, so a city could have $500 million worth of roads and show zero on its balance sheet. Under GASB 34, these assets appear on the Statement of Net Position at historical cost, and governments choose between two methods for reporting ongoing use.

Depreciation Approach

This works the same way depreciation works in the private sector. The government records the asset at cost, estimates its useful life, and recognizes depreciation each year in the Statement of Activities. Accumulated depreciation reduces the asset’s carrying value over time. It is straightforward but can produce misleading results for assets like roads that are continuously maintained and don’t really “wear out” in the accounting sense.

Modified Approach

The alternative is available for infrastructure assets that are part of a network or subsystem. The government skips depreciation entirely. Spending to preserve the assets at a target condition level is expensed in the period incurred. Only spending that adds capacity or efficiency is capitalized.

The trade-off is substantial documentation. A government using the modified approach must maintain an asset management system that inventories the assets and assesses their condition, estimate the annual cost needed to maintain them at the disclosed condition level, and demonstrate through at least three condition assessments that the assets are being preserved at or above that level. Two schedules must appear in the Required Supplementary Information showing the condition standard has been met.¹

What GASB 103 Changes Starting in Fiscal 2026

GASB Statement No. 103 is effective for fiscal years beginning after June 15, 2025. For a June 30 fiscal year-end, the first reports under GASB 103 cover the year ending June 30, 2026. Early implementation is permitted. GASB 103 keeps the dual-layer model, and governmental funds still use the current financial resources measurement focus and modified accrual basis. The GASB Board considered changing that and decided the costs would outweigh the benefits.³

What does change:

Proprietary funds now have formal definitions of operating and nonoperating revenues and expenses, and a new “subsidies” category with its own section and a subtotal for operating income and noncapital subsidies.
The MD&A is restructured into five required sections with a prohibition on boilerplate language.
Budgetary comparisons must be presented as RSI. The old option to present them as a basic financial statement is gone. Schedules must show variances between original and final budgets and between final budget and actual results, with explanations in notes to the RSI.³
The modified approach for infrastructure survives, but the MD&A discussion of modified-approach infrastructure has moved to notes to the RSI.³
“Special items” and “extraordinary items” are consolidated into a single “unusual or infrequent items” category, reported separately and on a gross basis.
Each major discretely presented component unit must be shown separately in the reporting entity’s Statement of Net Position and Statement of Activities rather than only in the notes.

Finance teams preparing fiscal 2026 reports need to work from GASB 103 for these presentation details, while the underlying framework, measurement approaches, and infrastructure rules described above remain the starting point for understanding governmental financial reports.

1
GASB. Summary – Statement No. 34
2
GASB. Summary – Statement No. 103
3
GASB. Statement No. 103 of the Governmental Accounting Standards Board