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Chapter 11

Granof-5e

Chapter 11

Granof-5e

Criteria for Reporting Entities (Cont’d)

Component Unit:

-Legally separate government

-Elected officials of primary government are financially accountable

-Exclusion of component unit might cause the primary government’s statements to be misleading.

Example 1: State of New York established Municipal Assistance Corporation to help the City of New York during financial difficulties.

Example 2 : Houston Zoo, Greater Houston Convention & Visitors Bureau

For reporting purposes, a governmental entity considers a component unit to be major if assets, liabilities, revenues or expenses exceed

10% of that component unit’s class and

5% of all component units combined.

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