[Ira Gilligan]

I am having an incredibly hard time with the blended/discreet questions for component units. I found two questions in ninja MC that are essentially the same, but with different outcomes.

1. Valley Town’s public school system is administered by a separately elected board of education. The board of education is not organized as a separate legal entity and does not have the power to levy taxes or issue bonds. Valley’s city council approves the school system’s budget. How should Valley report the public school system’s annual financial results?

A. Discrete presentation, yes; Blended, yes

B. Discrete presentation, yes; Blended, no

C. Discrete presentation, no; Blended, yes

D. Discrete presentation, no; Blended, no

Answer: C – Blending of financial results is allowed as the public school system and the city are not separate legal entities. The city is responsible for the finances of the school system (the school board has no authority to levy taxes or issue bonds).Discrete presentation is for affiliated entities whose resources are entirely for the benefit of the primary government. The school system does not operate for the sole benefit of the town.

2. South City School District has a separately elected governing body that administers the public school system. The district’s budget is subject to the approval of the city council. The district’s financial activity should be reported in the City’s financial statements by:

A. blending only.

B. discrete presentation.

C. inclusion as a footnote only.

D. either blending or inclusion as a footnote.

Answer: B – Per GASB 2100.109, financial information for separate organizations for which the primary government’s elected officials are financially accountable must be included in the primary government’s financial statements even though the organization is a separate legal entity. These separate organizations are called component units. Discrete presentation should be used for this presentation of financial information unless the financial activities of the two entities are so intertwined as to make them substantially the same entity. Since this does not appear to be the case in this question, discrete presentation of the information is required.

Why are the answers for these questions different? They seem identical to me. Any help with this would be appreciated.

AUD - 80
BEC - 92
FAR - 92
REG - 86

I've made a huge mistake.

FAR - (scheduled 9/24/16)
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REG -
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[caotran]

Please correct me if I'm wrong: I guess the key words here are ” separate legal entity” (Discrete) or “not separate legal entity” (Blended).

[Ira Gilligan]

Yes, I think that makes sense. How are we supposed to know that South City School District in question 2 is a separate legal entity though?

AUD - 80
BEC - 92
FAR - 92
REG - 86

I've made a huge mistake.

FAR - (scheduled 9/24/16)
BEC -
REG -
AUD -

[CPAKING]

Hey There!

I think the key that hinted that 2nd question should be presented for Discrete presentation is that the financial statements of the reporting entity would provide an overview of the entity based on financial accountability.

Discrete presentation is used when the criteria for blended presentation are not met..I don't believe it HAS to be a legal entity to qualify for discreet presentation..

FAR - 8/24/2016
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[Ira Gilligan]

Thanks for the responses. While going through the questions on this topic in my CPAExcel course, I found a question that seems to contradict the second question in my original post.

The Excel City School District has a separate elected governing body that administers the public school system. The district's budget must be approved by the city council of Excel City. The school district's financial activity should be reported in the City's financial statements by:

A. Discrete presentation.
B. Blending.
C. Footnote.
D. Not at all.

Answer: D – In order to be considered “financially accountable” to the primary government, at least half of the governing body of the component unit must be controlled by the primary government AND the primary government must be impose its will on the component unit (approve the budget, appoint-remove management, shift financial burdens or benefits, etc.). In this case, the first criterion has not been met and therefore the school district should NOT be considered a component unit.

How is this any different than the 2nd question in my original post (with South City School District)?

AUD - 80
BEC - 92
FAR - 92
REG - 86

I've made a huge mistake.

FAR - (scheduled 9/24/16)
BEC -
REG -
AUD -

[GeauxAwayCPA]

Following this. I remember also having trouble with these two questions when I took FAR the first time(also using CPA Excel).

Licensed CPA in Texas trying to start up my own tax practice

[pharaoh]

Governmental is my weakest section, so I hope I will not confuse anyone.

What I know, if you are not independent (Legally and financially), you are part of me —-> Blended – so question 1 said “The board of education is not organized as a separate legal entity”

If you are legally independent/separate board but not financially independent and seeking my approval for your budget —-> Discrete, so question 2, separate board and nothing says it is NOT separate legal entity

For Question 3, WTH!!!!! 🙂 I remember that question and the answer was discrete, I am not sure why you have that answer. If you are legally and financially independent then you are on your own and report separately, but in this question, City's approval for the budget is still required

AUD - 93
BEC - 79
FAR - 84
REG - 83

Roger & Ninja MCQ

DONE

FAR 8/2016
AUD 1/2017
REG TBD
BEC TBD

[Ira Gilligan]

I about threw my computer across the room when CPAExcel gave me that answer for the 3rd one. I think I'm just going to assume that CPAExcel is wrong on that question.

AUD - 80
BEC - 92
FAR - 92
REG - 86

I've made a huge mistake.

FAR - (scheduled 9/24/16)
BEC -
REG -
AUD -

[Author]

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