Balsam City's library board is appointed by the city council which has agreed to subsidize the operating costs of the library at a material amount to be determined each year.In addition,the city is paying debt service on general obligation bonds issued to construct the library.Based on generally accepted accounting principles (GAAP)criteria for defining the reporting entity:

Question

Quizplus · Accepted Answer

According to GAAP criteria, a component unit is a legally separate organization that meets one or more of the following criteria: (1) has a separate governing board, (2) is fiscally dependent on the primary government, or (3) is accountable to the primary government. In this case, the library board is appointed by the city council and the city subsidizes its operating costs and debt service on general obligation bonds, indicating that the library is fiscally dependent on the city and accountable to it. Therefore, the library is considered a component unit of Balsam City.

Balsam City's Library Board Is Appointed by the City Council