Detailed Answer
(d) The concept underlying the definition of the financial
reporting entity is that elected officials are accountable to
their constituents for their actions. Accordingly, the financial
reporting entity consists of (1) the primary government,
(2) organizations for which the primary government is financially
accountable, and (3) other organizations for which the
nature and significance of their relationship with the primary
government is such that exclusion would cause the reporting
entity’s financial statements to be misleading or incomplete.
Thus, the basic criterion used to determine the reporting entity is
financial accountability.
