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TheRedRoost3r
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Joined: 06 Sep 2006
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Posts: 138

Posted: 21 Dec 2008 at 04:45 \| IP Logged

Greetings,

I am having a little trouble understanding what the difference is for blending and discrete presentation for component units on a government's financials. It seems to me for blended your board must be the same as the board for the government or that the component unit services exclusively the government (wtf does this mean tho???)

If you do not meet those two requirements, you fail and must use discrete presentation.

OK. Let me post two questions and please help me understand them:

Question: Valley Town's public school system is administered by a separately elected board of education. The board of education is not organized as a separate legal entity and does not have the power to levy taxes or issue bonds. Valley's city council approves the school system's budget. How should Valley report the public school system's annual financial results?

Answer: Blended presentation

I thought it would have been discrete :(

Question: South City School District has a separately elected governing body that administers the public school system. The district's budget is subject to the approval of the city council. The district's financial activity should be reported in the City's financial statements by...

Answer: Discrete presentation

I answered blended because it sounded similar to the previous question. However I got it wrong :(

Edited by TheRedRoost3r on 21 Dec 2008 at 04:46

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LeadFoot
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Posted: 21 Dec 2008 at 09:25 \| IP Logged

Q1. Valley Town's public school system is not legally separate and therefore is not a component unit per GASB definition. So discrete presentation is not appropriate. Since the public school system is part of the primary government, its results should be blended with those of the primary government.

Q2. Since a School District is a legally separate unit, it is a component unit and its default presentation is discrete. If the component unit is, in substance, the same as the primary government, then it should be blended.

The key is to first determine if something is a component unit. If it is, discrete presentation is the usual treatment. Only when the component unit is so integral to the primary government that it should be blended. If something is not a component unit, then it is either blended or left out of the primary government financial statements altogether.

Edited by LeadFoot on 21 Dec 2008 at 09:27

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