GASBS 14 acknowledges that there are other conditions that may exist that also indicate that the primary government has the capability to impose its will on another organization. As with the previously described tests, the focus should be on substance rather than on insignificant or ministerial approvals.
Financial benefit to or burden on the primary government. If the primary government appoints a voting majority of the organization’s governing board and there is a potential for the organization to either provide specific financial benefits to or impose specific financial burdens on the primary government, the primary government is financially accountable for the organization.The benefit or burden to the primary government may be demonstrated in several ways, such as legal entitlements or obligations or reflection of the benefit or burden in decisions made by the primary government or agreements between the primary government and the organization.

The financial burden or benefit may be direct or indirect. A direct financial burden or benefit occurs when the primary government is entitled to the resources or is obligated for the deficits or debts of the organization. An indirect benefit or burden exists if one or more of the primary government’s component units is entitled to the resources or is obligated for the deficits or debts of the organization.

Taken From : Governmental Accounting Made Easy

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