GASB 100: Accounting Changes and Error Corrections — A Complete Implementation Guide
Executive Overview
GASB Statement No. 100, Accounting Changes and Error Corrections, became effective for fiscal years beginning after June 15, 2023, fundamentally reshaping how state and local governments account for, present, and disclose changes in accounting principles, estimates, and error corrections. This standard replaced the guidance in GASB Statement No. 62, paragraphs 315–334, which had remained largely unchanged for over a decade.
The shift from the previous framework to GASB 100 represents a significant modernization effort that aligns government accounting more closely with private-sector standards while preserving the unique characteristics of governmental financial reporting. For finance directors, controllers, and external auditors, mastering GASB 100 is essential to avoid restatements, maintain audit compliance, and ensure stakeholders understand the impact of accounting changes.
This guide walks through the three-tier hierarchy of accounting changes, provides practical journal entries for each type, outlines disclosure requirements, explains restatement methodology, and compares pre- and post-GASB 100 treatments.
The GASB 100 Hierarchy: Three Types of Accounting Changes
GASB 100 establishes a clear, three-level hierarchy for categorizing accounting changes and error corrections:
- Changes in Accounting Principle
- Changes in Accounting Estimate
- Error Corrections
Each type has distinct measurement, presentation, and disclosure requirements.
Type 1: Changes in Accounting Principle
A change in accounting principle occurs when an entity adopts a different accounting treatment that is also acceptable under GASB, or when a new GASB standard mandates a different accounting method.
Definition and Scope:
- Switching from one acceptable GAAP method to another (e.g., from FIFO to weighted-average inventory cost flow)
- Adopting new GASB guidance (e.g., GASB 96 Subscription-Based Information Technology Arrangements)
- Changes in the application of an existing principle
Measurement Requirement: Changes in accounting principle require retrospective application, meaning:
- Restate prior periods as if the new principle had always been in effect
- Adjust opening retained earnings/fund balance of the earliest period presented
- All comparative financial statements are recalculated under the new principle
Journal Entry Example — Inventory Cost Flow Change:
Suppose a Water Utility adopted weighted-average inventory costing on July 1, 2025 (start of FY 2026), replacing FIFO. The retrospective adjustment determined that prior-year inventory was understated by $145,000.
July 1, 2025 (Opening Entry):
Dr. Inventory $145,000
Cr. Fund Balance—Beginning Balance Adjustment $145,000
Memo: To record cumulative effect of change in accounting
principle from FIFO to weighted-average inventory costing.
The fund balance adjustment is presented as a line item in the Statement of Revenues, Expenditures, and Changes in Fund Balance, or restated in comparative periods.
When Prospective Application is Permitted: GASB 100 allows prospective application (new principle effective going forward) only when:
- Retrospective application is not practical
- The entity cannot reasonably determine the cumulative effect
- The cost of retrospective restatement is disproportionate
Example: A small municipality discovering that it misclassified capital improvements for the past 8 years may be granted prospective application if restating 8 years of financial statements is impracticable.
Type 2: Changes in Accounting Estimate
Accounting estimates change as new information becomes available or circumstances change. These include:
- Useful lives of capital assets
- Allowance for doubtful accounts
- Accrual of compensated absences
- Environmental liabilities
- Pension actuarial assumptions
Measurement Requirement: Changes in accounting estimates are applied prospectively, beginning in the period of change. No restatement, no cumulative adjustment.
Journal Entry Example — Change in Useful Life:
A City transportation fleet controller revised the useful life of transit buses from 12 years to 14 years effective January 1, 2026, based on an independent mechanical assessment showing extended service life. The gross cost of buses is $8.4 million, accumulated depreciation is $5.0 million (as of December 31, 2025), and the remaining book value is $3.4 million.
Under the old estimate (2 years remaining life): Annual depreciation = $3.4M / 2 = $1.7M Under the new estimate (4 years remaining life): Annual depreciation = $3.4M / 4 = $0.85M
The 2026 depreciation entry:
December 31, 2026:
Dr. Depreciation Expense $850,000
Cr. Accumulated Depreciation—Vehicles $850,000
Memo: Annual depreciation computed using revised
useful life of 14 years (prospective change in estimate).
No prior-year restatement occurs. The note disclosure explains the estimate change and its effect on current-period depreciation.
Pension Assumption Changes: A classic example is a pension plan sponsor revising the investment return assumption from 7.0% to 6.5% based on updated capital markets analysis. This triggers a prospective increase in annual pension expense in all future periods, but prior years remain unadjusted.
Type 3: Error Corrections
An error is a misstatement of a prior-period transaction or event due to mathematical mistakes, misapplication of GAAP, oversights, or misuse of facts that existed at the time of the transaction.
Common Errors in Government Accounting:
- Failure to accrue year-end expenditures or liabilities
- Misclassification of revenues (e.g., interest revenue recorded as program revenue)
- Capitalization or expensing errors (e.g., a $15,000 roof repair capitalized as a building improvement)
- Duplicate recordings or omitted transactions
- Incorrect fund balance classifications
Measurement Requirement: Error corrections require retrospective restatement of all affected periods and the opening balance of the earliest period presented.
Journal Entry Example — Prior-Year Expenditure Accrual:
In January 2026, a Parks Department discovered that it failed to accrue $220,000 in maintenance contractor invoices as of December 31, 2025. The invoices were received and processed in January 2026. This is a material understatement of FY 2025 expenditures.
Error-Correction Entry (recorded in FY 2026):
January 15, 2026:
Dr. Expenditure—Correction of Prior-Period Error $220,000
Cr. Accounts Payable $220,000
Memo: Correction of omitted accrual for maintenance
services rendered in FY 2025.
Simultaneously, the opening fund balance of FY 2026 is restated:
Dr. Fund Balance—Prior-Period Adjustment $220,000
Cr. Expenditure—Correction of Prior-Period Error $220,000
This nets to zero in the current year but corrects the opening balance. The Statement of Revenues, Expenditures, and Changes in Fund Balance shows a "Prior-Period Adjustment" line (or restatement in comparatives).
Disclosure Requirements Under GASB 100
GASB 100 strengthens disclosure requirements to provide users with transparent understanding of accounting changes and their impact.
For Changes in Accounting Principle
The entity must disclose:
- Nature of the change — Clearly identify the old and new principle
- Reason for the change — Why the new principle is preferable; if mandated by new GASB guidance, cite the statement number and effective date
- Effect on the financial statements — Quantify the cumulative effect on fund balance / net position and current-period net income / net expense, both gross and net of tax effects (if applicable)
- Effect on net position — Show impact on each component (unrestricted, restricted, etc.) if applicable
- Comparative periods — If prior-period statements are presented, note that they have been restated
Disclosure Language Example:
The City adopted GASB Statement No. 96, Subscription-Based Information Technology Arrangements (SBITA), effective July 1, 2025. Under the new standard, the City recognizes a right-of-use asset and a subscription liability for cloud-based software subscriptions previously classified as operating expenses. The cumulative effect of the change, retroactive to the earliest presented period (July 1, 2023), decreased beginning fund balance by $485,000. The change reduced FY 2026 expenditures by $162,000 and increased depreciation expense by $168,000. All comparative periods have been restated.
For Changes in Accounting Estimate
Disclosure must include:
- Nature and effect — Describe the estimate change and its quantitative impact on current-period results
- The new estimate — State the revised assumption or methodology
- When not separately disclosed — If the effect cannot be reasonably estimated (e.g., a change affecting multiple future periods), the entity may disclose that fact
Disclosure Language Example:
Effective July 1, 2025, the Water Utility extended the useful lives of distribution pipes from 50 years to 60 years based on an actuarial water infrastructure study indicating extended service life under proper maintenance protocols. This change decreased depreciation expense for FY 2026 by $420,000. The effect on future periods is expected to be approximately $410,000 annually over the remaining lives of the affected assets.
For Error Corrections
Disclosure must include:
- Nature of the error — Describe the nature and cause
- Effect of correction — Quantify the impact on fund balance / net position and results of operations
- Period affected — Identify which prior periods are restated
- Restatement of comparatives — Note that prior-period financial statements have been restated
Disclosure Language Example:
During FY 2026, the City discovered an error in the FY 2025 financial statements. Construction contracts for the Water System Expansion Project, totaling $890,000, were not accrued as of December 31, 2025, although services were substantially performed. The error resulted in an understatement of expenditures and accounts payable in FY 2025. The FY 2025 comparative financial statements have been restated to reflect the correction. The correction decreased beginning fund balance by $890,000 in FY 2026.
Restatement Methodology
When an entity restates prior periods due to a change in principle or error correction, the process requires careful execution to maintain data integrity and audit trail.
Step-by-Step Restatement Process
Step 1: Identify All Affected Periods Determine how far back the restatement extends. For a new GASB standard, the entity typically restates all periods presented (usually at least two prior years). For an error, restate to the period in which the error occurred.
Step 2: Calculate Cumulative Effect Through Prior Year-End Compute the total impact of the change or correction on retained earnings / fund balance as of the end of the latest prior period presented. This becomes the opening adjustment in that prior period.
Step 3: Calculate Period-Specific Effects For each restated period, separately calculate the impact on:
- Revenues / additions
- Expenditures / expenses
- Net income / net change in fund balance
- Fund balance / net position components
Step 4: Restate the Fund Balance / Net Position Statement Show the adjustment as a line item or separately present the restatement:
Opening Fund Balance (as originally reported) $5,200,000
Prior-Period Adjustment (accounting change) ($485,000)
Opening Fund Balance (as restated) $4,715,000
Step 5: Restate All Income / Expense Line Items Adjust revenues and expenditures in the comparative Statement of Revenues, Expenditures, and Changes in Fund Balance for each restated period.
Step 6: Adjust Asset and Liability Accounts Update the comparative Balance Sheet / Statement of Net Position to reflect the cumulative effect.
Step 7: Document the Audit Trail Prepare a detailed reconciliation schedule showing, for each restated period:
- Original reported amounts
- Adjusting entries (by account)
- Restated amounts
- Variance explanation
Example: Restatement for Change in Accounting Principle
A General Fund originally reported fund balance of $12.5M as of June 30, 2025, under one accounting principle. Upon adoption of a new GASB standard effective July 1, 2025, the entity determined that the change should be applied retrospectively, resulting in a $650,000 cumulative decrease.
Restatement Presentation:
| Account | Originally Reported | Adjustment | Restated |
|---|---|---|---|
| Fund Balance, July 1, 2024 | $11,800,000 | ($620,000) | $11,180,000 |
| Revenues & Additions | $3,450,000 | ($15,000) | $3,435,000 |
| Expenditures & Deductions | ($2,750,000) | ($15,000) | ($2,765,000) |
| Fund Balance, June 30, 2025 | $12,500,000 | ($650,000) | $11,850,000 |
Comparison: Pre-GASB 100 vs. GASB 100 Treatment
The transition to GASB 100 introduced subtle but important changes in how entities account for and present changes.
Changes in Accounting Principle
| Aspect | Pre-GASB 62 Guidance | GASB 100 |
|---|---|---|
| Treatment | Retrospective application (generally) | Retrospective application (unless impractical) |
| Prospective Allowance | Limited to unusual circumstances | Allowed when retrospective is impractical; must disclose impracticability |
| Presentation | Cumulative effect disclosed in notes | Cumulative effect shown as prior-period adjustment in fund balance statement |
| Disclosure Specificity | Qualitative description | Quantitative impact required; effect on all three components (revenues, expenditures, net change) |
| Comparative Restatement | Optional in some cases | Required; all presented periods restated |
Changes in Accounting Estimate
| Aspect | Pre-GASB 62 | GASB 100 |
|---|---|---|
| Treatment | Prospective | Prospective (no change) |
| Disclosure | Impact disclosed if material | Impact must be quantified; describe the change and reason |
| Future Periods | No required disclosure | Disclose expected effect on future periods if estimable |
Error Corrections
| Aspect | Pre-GASB 62 | GASB 100 |
|---|---|---|
| Treatment | Retrospective restatement | Retrospective restatement (unchanged) |
| Presentation | Often buried in notes | Prominent presentation as prior-period adjustment |
| Disclosure | Limited; focused on correction | Nature, cause, and quantified effect; identification of restated periods |
| Internal Controls | Not explicitly addressed | Implicit expectation of control environment disclosure |
Common Implementation Challenges and Solutions
Challenge 1: Determining Impracticability
Organizations sometimes claim that retrospective application of a change in principle is "impracticable," allowing prospective application instead. GASB 100 permits this but requires specific findings.
Solution: Document the effort to determine the cumulative effect. Show:
- Specific systems limitations preventing data retrieval
- Cost-benefit analysis if available
- Internal control deficiencies that make restatement infeasible
A government with well-maintained historical accounting records and accessible general ledgers will have difficulty justifying impracticability. Conversely, a small municipality that migrated to a new ERP system three years ago and no longer has reliable access to pre-migration detail might justify prospective treatment.
Challenge 2: Comparative Period Data
Restating multiple prior periods requires stable financial data. If underlying accounting records are unavailable or unreliable, the entity must either:
- Invest in data recovery and reconstruction
- Present only one prior year for comparison (with a note explaining data limitations)
- Apply the change prospectively (with full disclosure of why retrospective treatment was infeasible)
Challenge 3: Audit Coordination
When an auditor discovers an error in a prior-period financial statement (and the prior-year audit was completed), the current-year audit must coordinate with the prior-year auditor to:
- Assess materiality in the prior period
- Determine whether a management letter comment is appropriate
- Document conclusions about whether restatement is required
Timing: The decision to restate typically occurs during the current-year audit, not retroactively. Once prior-year financial statements are released (and especially if audited), changing them requires careful consideration of reliance, materiality, and stakeholder communication.
Challenge 4: Fund Balance / Net Position Segregation
When restating, ensure that any opening adjustments are properly allocated to the correct fund balance classification (committed, assigned, unassigned) or net position component (unrestricted, restricted by donor, etc.). Failure to do so can misstate fund balance reserves and trigger false audit findings.
Practical Implementation Timeline
For a Change in Accounting Principle
Month 1–2 (Identification and Research)
- Determine if change is mandated by new GASB guidance or voluntary
- Research the new principle and requirements
- Obtain external guidance (auditor consultation, peer discussions)
Month 3–4 (Quantification)
- Calculate cumulative effect on all affected accounts
- Identify earliest period requiring restatement
- Prepare detailed reconciliation schedules
Month 5–6 (System Adjustments)
- Update GL charts of accounts if necessary
- Program system adjustments if automation is available
- Restate historical balances in ledger
Month 7–8 (Disclosure Drafting and Audit)
- Prepare GASB 100 disclosure in financial statement notes
- Work with auditor on audit procedures
- Finalize restated financial statements
For an Error Correction
Immediate (Discovery)
- Document the error: nature, cause, period affected
- Quantify the impact
- Assess materiality
Next 1–2 Weeks
- Notify the external auditor
- Determine whether restatement is required
- Plan the correcting entry
Month of Year-End Audit (Typically)
- Record the correction during current year
- Restate prior-period comparatives
- Finalize disclosure
Disclosure Checklist
Use this checklist to ensure compliance with GASB 100 disclosure requirements:
Change in Accounting Principle
- Nature of change and reason for change (especially if mandated by GASB)
- Quantified effect on fund balance / net position
- Effect on revenues, expenditures, and net change (all three required)
- Effect on each net position component (if applicable)
- Note that prior-period statements are restated
- Effective date and transitional guidance (if applicable)
Change in Accounting Estimate
- Nature of change and reason
- Quantified effect on current-period results
- Effect on future periods (if estimable)
- When effect is not separately determinable (if applicable)
Error Correction
- Nature of error and cause
- Quantified effect on fund balance / net position and results of operations
- Prior periods restated
- Note in comparative period statements
Conclusion
GASB 100 brings clarity and consistency to government accounting for changes and corrections while strengthening disclosure standards. Finance professionals must understand the three-tier hierarchy, recognize when each type applies, and execute restatements with precision to maintain audit compliance and stakeholder trust.
The key takeaway: Retrospective for principles and errors; prospective for estimates. When in doubt, consult your external auditor early and document your accounting conclusions thoroughly.
This article was prepared with AI-assisted research by DWU Consulting. It is provided for informational purposes only and does not constitute legal, financial, or investment advice. All data should be independently verified before use in any official capacity.