How should component units be displayed in government-wide financial statements?

Question

Quizplus · Accepted Answer

Component units that are closely related to the primary government should be blended with the primary government's financial statements where appropriate. Discretely presented component units should be presented in a separate column on the government-wide financial statements to provide transparency and distinguish their financial activity from that of the primary government. Therefore, Option C is the best choice. Option A is not correct because component units often have a significant impact on the financial statements, so they should be included. Option B is incorrect because some component units may not fit clearly in either the governmental activities column or the business-type activities column. Option D is incorrect because not all component units are business-type activities.

How Should Component Units Be Displayed in Government-Wide Financial Statements