Under GASB reporting entity standards,a component unit is
A)An organization for which the nature and significance of their relationship with the primary government are such that exclusion would cause the reporting entity's financial statements to be misleading or incomplete.
B)A legally separate organization that is financially independent of a primary government and on which the primary government cannot impose its will.
C)A large department of a primary government.
D)A not-for-profit organization that is authorized to operate within the boundaries of a city but is not accountable financially or in other way to the city.

Question

Quizplus · Accepted Answer

A component unit is an organization for which the nature and significance of their relationship with the primary government are such that exclusion would cause the reporting entity's financial statements to be misleading or incomplete. In other words, it is a separate entity that is closely related to the primary government and cannot be ignored in the financial statements without distorting the picture of the primary government's financial position or results of operations.

Under GASB Reporting Entity Standards,a Component Unit Is