GASB clarifies guidance on blending certain component units into financial statements

By Ken Tysiac

A new standard issued Thursday by GASB is designed to clarify how certain component units incorporated as not-for-profit corporations should be presented in state or local government financial statements.

GASB Statement No. 80, Blending Requirements for Certain Component Units, requires these component units to be blended into the primary state or local government’s financial statements, in a manner similar to a department or activity of the primary government.

The standard was created to clarify the display requirements in GASB Statement No. 14, The Financial Reporting Entity. The guidance is designed to eliminate diversity in practice that has existed in the presentation of not-for-profit corporations in which the primary government is the sole corporate member.

Statement No. 80 applies to a limited number of governmental units, such as public hospitals, but was designed to enhance the comparability of financial statements among those units and improve the value of information for users of state and local government financial statements.

The standard takes effect for reporting periods beginning after June 15, 2016, and GASB encourages earlier application.

—Ken Tysiac (ktysiac@aicpa.org) is a JofA editorial director.

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