Chapter 18, Problem 18.12Q

To determine

Financial accountability: GASB 14 states the primary government’s financial accountability. It is evident when the primary government appoints a majority of organization’s governing board. Thus it has effective control over organization with its ability to impose removal or appointment of members of the organizations governing body. Approve or modify organization’s budget, veto or overrule the decisions of governing body and appointment of persons responsible for organizations day-to-day operations. These indicates that when primary governmental unit is accountable for independent organization, those organizations should be included in primary government’s financial statements as component units.

To explain:The component units of a government, and how are they reported.