Criteria for Reporting Entities (Cont’d)
-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.