Officials for the City of Anderson, West Virginia, have recently formed a transit authority to create a public transportation system for the community. These same officials are now preparing the city’s CAFR for the most recent year. The transit authority has already lost a considerable amount of money. Officials have become interested in its financial reporting and whether it qualifies as a component unit of the city. Following are several articles written about the reporting of component units by a state or local government:

“Changes in Component Units,” Government Finance Review, February 2011.

“GASB Issues Guidance on Financial Reporting Entity, Component Units,” Accounting Policy & Practice Report, January 7, 2011.

“Financial Reporting for Affiliated Organizations,” The Journal of Government Financial Management, Winter 2003.

“How to Implement GASB Statement No. 34,” The Journal of Accountancy, November 2001.

“GASB Issues Guidance on Blending Certain Component Units into Financial Statements,” Investment Weekly News, February 27, 2016.

“Accounting for Affiliated Organizations,” Government Finance Review, December 2002.

“Component Unit Reporting in the New Reporting Model,” The CPA Journal, October 2001.

Required
Read one or more of the preceding articles and any others that you may discover about component units. Write a memo to city officials providing as much detailed information about component units and their reporting as you can to help these individuals understand the challenges and difficulties of this reporting.