GASB has issued an exposure draft of an implementation guide update focused entirely on a single topic. GASB Statement No. 103, Financial Reporting Model Improvements (GASB 103), includes a requirement that proprietary fund statements of revenues, expenses, and changes in fund net position continue to distinguish between operating and nonoperating revenues and expenses that existed in previous guidance. However, GASB 103 provides clarified definitions of operating and nonoperating. Nonoperating revenues and expenses are defined to include five categories of items, one of which is subsidies received and provided. As stakeholders have applied the term “subsidies” to certain transactions, the GASB staff has identified the need for further clarification in the implementation guide update. Some of these proposed questions and answers may be particularly relevant for higher education institutions.
Donations for Scholarships
The implementation guide update exposure draft includes two questions related to donations for scholarships received by a higher education institution that reports as a business-type activity (BTA) or enterprise fund from individuals who do not receive goods or services in return.
The proposed answers to both questions indicate that the donations meet the definition of subsidy because the donations are received from parties who have not received goods or services from the institution in return and the donations keep the current or future tuition or other charges lower than they would be otherwise. Even if published tuition rates do not change based on the donations received, the donations either directly or indirectly keep current or future tuition or other charges lower than they would be otherwise and the donations would meet the definition of a subsidy. As subsidies, the donations for scholarships described in the questions would be considered nonoperating revenues.
Research Grants
The accounting for research grants can be complicated. The implementation guide exposure draft includes a question that asks if research grants received by a higher education institution meet the definition of a subsidy. The proposed answer indicates there is not a simple yes or no answer; it will depend on the substance of the transaction.
If the grant is used to offset operating expenses that would exist in the grant’s absence, those grant funds would allow the institution to keep its tuition or other charges lower than if the institution had not received the grant. Therefore, that type of grant would meet the definition of a subsidy.
However, if the grant is not used to offset operating expenses that would exist in the grant’s absence, the grant funds received do not impact the tuition or other charges of the institution. In this scenario, the grant would not meet the definition of a subsidy.
Therefore, it is possible that an institution may have some research grants that are subsidies classified as nonoperating revenues and some research grants that are not subsidies classified as operating revenues, unless they meet one of the other criteria for classification as nonoperating.
Supplemental Payments to Hospitals
If your institution receives supplemental payments in addition to the standard contractual Medicaid base payments, those payments are not part of a contractual relationship between the patient and the institution for healthcare coverage. The exposure draft includes a proposed question and answer to clarify that those supplemental payments meet the definition of a subsidy and would be considered nonoperating revenue.
Other Topics
The implementation guide update exposure draft also includes questions regarding taxes imposed by BTAs, passenger facility charges received by airports, and the classification and reporting of subsidies. Consider reading the full exposure draft for topics that may impact you and your organization.
The implementation guide is effective for fiscal years beginning after June 15, 2025 with earlier application encouraged if GASB 103 has been implemented. GASB intends to provide this implementation guidance in final form prior to June 30, 2026 so entities can apply it before the effective date of GASB 103.
What Should You Do?
We recommend you share your feedback with GASB, including what you agree with and what you may disagree with. GASB has made the feedback process more convenient than ever—you can fill out an online feedback form. You can also submit a formal comment letter if you prefer. Whether you provide feedback online or through a letter, comments are due April 27, 2026 and we hope you consider sharing your feedback during this critical standard-setting process.
If you have any questions or need assistance, please reach out to a professional at Forvis Mazars.