GASB 103 and U.S. Airports: What Changes in FY2026 Financial Statements

Why This Standard Matters for Airports

GASB Statement No. 103 is the broadest revision to the government financial reporting model since GASB 34 established its current structure in 1999 — addressing MD&A, proprietary fund presentation, unusual items, component unit reporting, and budgetary comparisons in a single statement. It is effective for fiscal years beginning after June 15, 2025 — meaning airports with June 30 fiscal year-ends will adopt it in FY2026, and those with September 30 or December 31 year-ends will follow shortly after. The standard requires retrospective application where practicable, so prior-year comparative numbers generally must be restated.

For airports, the core change is this: GASB 103 explicitly defines what is "nonoperating" in a proprietary fund's statement of revenues, expenses, and changes in net position. Under GASB 34, this classification was left to management judgment (¶100), and airports exercised that judgment inconsistently. One airport classified customer facility charge (CFC) revenue as operating; another classified it as nonoperating. Passenger facility charge (PFC) treatment varied. Even interest income placement differed. Cross-airport comparability required manual reclassification.

GASB 103 resolves this by defining five specific categories of nonoperating revenues and expenses, creating a new "noncapital subsidies" category, and requiring a new subtotal that forces uniform presentation across all enterprise funds.

The New Statement Structure

Every airport Annual Comprehensive Financial Report (ACFR) from FY2026 onward will present the statement of revenues, expenses, and changes in net position in a new format. The critical structural addition is a required subtotal — "Operating Income (Loss) and Noncapital Subsidies" — inserted between operating income and other nonoperating items.

Under the prior model, an airport's statement had three broad sections: operating, nonoperating, and capital contributions. Under GASB 103, nonoperating splits into two tiers — noncapital subsidies (reported immediately after operating income) and all other nonoperating items (reported below the new subtotal).

For airport financial analysts, this new subtotal provides a clear single-line indicator of how much of an airport's result depends on operating exchange revenues versus subsidies. It reveals the airport's operational result including subsidies that support operations — a more complete picture than operating income alone. An airport with a large operating loss but noncapital subsidies that exceed that loss may still be operationally healthy; the subtotal makes this visible without requiring the reader to parse the nonoperating section.

Five Categories of Nonoperating — Now Explicit

GASB 103 defines nonoperating revenues and expenses as belonging to five enumerated categories. Everything that does not fall into one of these five categories is operating by default:

1. Subsidies received and provided — both noncapital (supporting operations and keeping fees lower) and capital. This is the largest new classification area for airports.

2. Contributions to permanent and term endowments — rare at airports, though some airport foundations or community benefit programs may qualify.

3. Revenues and expenses related to financing — interest expense on revenue bonds, bond issuance costs, debt-related fees, and similar financing charges. This category largely matches current airport practice.

4. Resources from disposal of capital assets and inventory — gains or losses on sale of equipment, land, retired infrastructure. Airports regularly dispose of decommissioned assets; this treatment is unchanged from common practice.

5. Investment income and expenses — interest income on invested reserves, realized and unrealized gains on investments. Again, consistent with how most airports already classify these items.

The significance is not in individual categories — most are intuitive — but in the structural rule: if a revenue or expense does not fit one of these five boxes, it is operating. This eliminates the management judgment that created diversity in practice under GASB 34.

How Airport Revenue Items Are Reclassified

The practical question for airport finance officers is: which line items move? The following table maps common airport revenue and expense items to their GASB 103 classification, compared to pre-103 practice where treatment varied across airports.

The items that do not change — landing fees, terminal rents, concessions, parking — represent the core of airport operating revenue. These are exchange transactions where the airport provides goods or services, and GASB 103 correctly classifies them as operating. The items that shift are the non-exchange revenue sources and financing-related items that airports previously classified inconsistently.

The PFC Classification Question

A key judgment call for airports under GASB 103 concerns passenger facility charges. Under 49 USC §40117, airports are authorized to impose a PFC of up to $4.50 per enplaned passenger on each flight segment originating at the airport, subject to FAA approval. PFCs have historically been classified as nonoperating revenue on the GAAP statement. Under GASB 103, the question becomes more specific: is the PFC a "subsidy"?

GASB 103 defines a subsidy as: (1) a resource received for which the proprietary fund does not provide goods or services to the provider, and that directly or indirectly keeps the fund's current or future fees and charges lower than they would be otherwise; (2) a resource provided to another party or fund for which the other party does not provide goods or services, and that is recoverable through the proprietary fund's pricing policies; or (3) all other transfers to or from the government's other funds or component units that are not capital contributions. PFCs may meet the first element. The PFC is a federally authorized charge collected by airlines on behalf of the airport and remitted monthly — the passenger does not receive a specific good or service from the airport in exchange for the PFC at the point of collection. PFC proceeds are restricted to FAA-approved capital projects: airports use them either on a pay-as-you-go basis or to pay debt service on bonds that financed eligible capital improvements. PFC-funded capital projects reduce the capital costs that would otherwise be recovered through airline rates, directly keeping airline fees lower. Whether the capital investment funded by PFCs constitutes an indirect "service" to the passenger is a judgment call that auditors and airport finance officers will need to evaluate under the GASB 103 framework.