Answer to Question #223712 in Accounting for Milan

Question

Marta City's school district is a legally separate entity, but two of its seven board members are also City Council members and the district is financially dependent upon the city. The school district should be reported as a:

• Discrete Presentation

Can you provide me a simple explanation why the answer is Discrete Presentation? Thank you.

Answer 1

Solution:

Discrete presentation refers to where one or more component units are reported in separate columns after those pertaining to the main or central government.

Marta City’s school district, therefore, meets the test of a component unit of the city because it is a separate legal entity and it is financially accountable to the city. Also, financial information for different organizations (component units) for which the primary government’s elected officials are financially accountable must be included in the central government’s financial statements, including the fact that Marta school district does not exclusively service or benefit the city itself. Therefore, its financial data must be reported using the discrete presentation method.