GASB Issues Standard on Certain Risk Disclosures

In December 2023, The Governmental Accounting Standards Board (GASB) issued GASB Statement No. 102, Certain Risk Disclosures.

The guidance establishes financial reporting requirements for risks related to vulnerabilities due to certain concentrations (lack of diversity related to significant inflow or outflow of resources) or constraints (a limitation imposed by an external party or by a formal action). The regulator determined that many of these vulnerabilities exist and are known to governments, but are not explicitly required in the GASB’s and understanding these vulnerabilities is essential to a user of governmental financial statements.

All of the following criteria must be met in order for a concentration or constraint to require disclosure:

• The concentration or constraint is known to the government,
• It makes the government vulnerable to the risk of a substantial impact, and
• An event related to the concentration or constraint that could cause a substantial impact has occurred, begun to occur or is more likely than not to begin to occur within 12 months of the date the financial statements are issued.

If mitigating steps are taken by the government before the financial statements are issued that cause any of these criteria to not be met, none of the disclosures are required. When the criteria are met, governments should disclose sufficient information about:

• The nature of the concentration or constraint,
• Each event associated with the concentration or constraint if the event has occurred or had begun to occur prior to the issuance of the financial statements, and
• Actions taken to mitigate such risks. 

GASB 102 is effective for fiscal years beginning after June 15, 2024, and all reporting periods thereafter. Earlier application is encouraged.