Generally accepted accounting principles (GAAP) for governments, which are set by the Governmental Accounting Standards Board (GASB), use a financial reporting model based on the financial accountability of elected officials. In government, a set of basic financial statements can include any number of legally separate governmental entities in cases where elected officials of one government are financially accountable for the affairs of other governments or where the exclusion of a separate entity would make the financial statements of the financial reporting entity misleading.1 The government with financial accountability for others is called the primary government, and the other included entities are called component units.

This is the third in a series of articles exploring some of the complexities that arise from this special form of consolidation termed a financial reporting entity.

• Publication date: February 2024
• Author: Michele Mark Levine