Blended Component Units
The preceding discussion focused on the presentation and disclosures required for discretely presented component units. This section will focus first on the determination of whether a component unit’s financial information should be “blended” with that of the primary government. When there are blended component units, the use of the term “primary government” is meant
to refer to the reporting government and the blended component units.
Why Blend Some Component Units?
One of the objectives of the financial reporting for the reporting entity described earlier was to be able to distinguish the financial information of the primary government from its component units. A question arises of why this objective seems to be abandoned in order to blend certain component units so that they are less distinguishable from the primary government. The answer to this is that the GASB concluded that there are component units that, despite being legally separate from the primary government, are so intertwined with the primary government that they are, in substance, the same as the primary government. It is more useful to report these component units as part of the primary government. These component units should be reported in a manner similar to the balances and transactions of the primary government itself, a method known as “blending.” This view was reinforced by GASBS 34, which made the primary government, including blended component units, the focus of financial reporting in the basic financial statements and required supplementary information.
Taken From : Governmental Accounting Made Easy