Which of the following is true regarding financial reporting of special-purpose entities?
A) Special-purpose entities might be included as component units in a primary government's financial statements.
B) Special-purpose entities that engage in more than one governmental activity may prepare statements that combine government-wide and governmental fund statements.
C) Both of the above are true.
D) Neither of the above is true.

Question

Quizplus · Accepted Answer

Special-purpose entities that are controlled by a primary government and that are required to be included in the primary government's financial statements are known as component units. Therefore, A is true. However, B is not true because special-purpose entities must prepare separate government-wide and fund financial statements.

Which of the Following Is True Regarding Financial Reporting of Special-Purpose