Note Disclosures
The notes to the financial statements of a financial reporting entity that includes many component units may be significantly expanded because of the need and requirements to disclose information about major component units.
The notes to the financial statements of the reporting entity should include a brief description of the component units of the financial reporting entity and their relationship to the primary government. The notes should include a discussion of the criteria for including the component units in the financial reporting entity and how the component units are reported. The notes should also include information about how the separate financial statements of the individual component units may be obtained.
SUMMARY
This chapter addresses the somewhat complex issue of what entities make up a government’s reporting entity. While there are detailed requirements as to which entities should be in and which entities should be left out, casual readers of financial statements do not have to be overly concerned with those decisions, unless of course they choose to be. Better to let the experts who prepared the financial statements worry about those details. What is important, however, is to understand what a component unit is, and to be able to distinguish between blended component units and discretely presented component units. This chapter should enable the reader to accomplish both of those objectives. Keep in mind when reading the note disclosures about component units in a government’s financial statements that usually only fairly limited information is provided. In other words, a government does not have to include all of the disclosure requirements that it must meet for itself for all of the component units that are included in its reporting entity. If the reader needs detailed information about a component unit, it is best to get the separately issued financial statements of the component unit.
Taken From : Governmental Accounting Made Easy