Financial Reporting Model—Reexamination of Statements 34, 35, 37, 41, and 46 and Interpretation 6

Project Description: The objective of this project is to make improvements to the financial reporting model, including Statement No. 34, Basic Financial Statements—and Management’s Discussion and Analysis—for State and Local Governments , and other reporting model-related pronouncements (Statements No. 35, Basic Financial Statements—and Management’s Discussion and Analysis—for Public Colleges and Universities , No. 37, Basic Financial Statements—and Management’s Discussion and Analysis—for State and Local Governments: Omnibus , No. 41, Budgetary Comparison Schedules—Perspective Differences , and No. 46, Net Assets Restricted by Enabling Legislation, and Interpretation No. 6, Recognition and Measurement of Certain Liabilities and Expenditures in Governmental Fund Financial Statements ). The objective of these improvements would be to enhance the effectiveness of the model in providing information that is essential for decision-making and enhance the ability to assess a government’s accounting and to address certain application issues, based upon the results of the pre-agenda research on the financial reporting model.

Status:
Exposure Draft Redeliberations

• Background
• Accounting and Financial Reporting Issues
• Project History
• Current Developments
• Work Plan
• Recent Minutes
• Minutes Archive
• Tentative Board Decisions to Date
• Task Force  
• Project staff:
  • Roberta Reese
  • Lisa Parker
  • Scott Reeser
  • Jordyn Jackson
  • Bharvi Patel
  • Lauren Maier
  • Danielle Pollock

 

FINANCIAL REPORTING MODEL—PROJECT PLAN

Background: Statement 34 was the culmination of 15 years of research, deliberation, and due process. In Statement 34, the GASB established the present blueprint for state and local government financial reporting—the format and measurement focus of the basic financial statements, certain related notes to the financial statements, and required supplementary information including management’s discussion and analysis (MD&A). Among its many features, Statement 34 introduced government-wide financial statements containing accrual information—which notably included the reporting of infrastructure, other capital assets, and long-term liabilities—for activities previously reported only on a modified accrual basis in the governmental funds. Statement 34 also required a narrative MD&A to precede the financial statements, added the presentation of the original budget to the budgetary comparison schedule, introduced major fund reporting in the governmental and enterprise funds, and added note disclosures related to capital asset and long-term liability activity during the reporting period.

Statement 34 was first effective for periods beginning after June 15, 2001. Most provisions of the Statement became effective in three phases, beginning with the largest governments. Up to an additional 4 years were allowed for Phase 1 (annual revenues of $100 million or more) and Phase 2 ($10 million to $100 million) governments to retroactively report existing infrastructure assets. Phase 3 governments (below $10 million) were allowed to report general infrastructure prospectively.

The financial reporting model has a pervasive influence over the effectiveness of financial reporting by state and local governments and the ability of that reporting to achieve the objectives of financial reporting. As a result, the GASB decided that it was important, as part of its commitment to maintaining the effectiveness of its standards, to reexamine the current financial reporting model now that it has been in place for a sufficient time. The pre-agenda research showed that most of the components of the financial reporting model are effective; however, the research identified several areas for potential improvements.

In conjunction with this project, the efforts to develop recognition concepts for information presented in governmental funds will be continued. The Board’s conceptual framework project on recognition was put on hold pending reexamination of the financial reporting model. Feedback to the Preliminary Views issued in June 2011 included recommendations that recognition concepts for governmental funds should be developed in conjunction with a reexamination of the financial reporting model.

Accounting and Financial Reporting Issues: The project is considering the following issues:

Management’s Discussion and Analysis (MD&A)—Explore options for enhancing the financial statement analysis component, consider the elimination of requirements that are boilerplate and no longer necessary for understanding the financial reporting model, and clarify guidance for presenting currently known facts, decisions, or conditions that are expected to have a significant effect on financial position or results of operations.

Governmental Fund Financial Statements—Explore a conceptually consistent measurement focus and basis of accounting and develop a presentation format for governmental fund financial statements consistent with the measurement focus and basis of accounting. In conjunction with this project, the conceptual framework project on recognition of element of financial statements was recommenced.

Proprietary Fund and Business-Type Activity Financial Statements—Evaluate operating indicator alternatives in conjunction with evaluating the guidance for the separate presentation of operating and nonoperating revenues and expenses.

Budgetary Comparisons—Explore the appropriate method of communication (either as basic financial statements or required supplementary information) for budgetary comparison information and consider whether and, if so, which budget variances should be required to be presented.

Other Issues—As appropriate and in conjunction with other topics, explore options that would permit more timely financial reporting or that would reduce complexity overall, such as presentation of special and extraordinary items and major component unit information.

Project History:

• Pre-agenda research approved: August 2013
• Research results reported to the Board: July 2015
• Added to current technical agenda: September 2015
• Task force established? Yes
• Deliberations began: October 2015
• Task force meeting held: June 2016
• Invitation to Comment cleared: December 2016
• Comment period: January–March 2017
• Deliberations on new issues for Preliminary Views began: December 2016
• Public hearings and user forums held: April–May 2017
• Task force meeting held: September 2017
• Redeliberations began: October 2017
• Preliminary Views approved: September 2018
• Comment period: September 2018–February 2019
• Deliberations on new issues for Exposure Draft began: October 2018
• Public hearings and user forums held: March 2019
• Redeliberations began: June 2019
• Exposure Draft approved: June 2020
• Comment period: July 2020–February 2021
• Public hearings and user forums held: March and April 2021
• Redeliberations began: May 2021

Current Developments: In August 2022, the Board continued redeliberation of issues related to the definition of subsidies. In November 2022, the Board redeliberated issues related to presentation of budgetary comparison information. In August through October 2022, the project staff conducted user interviews. In November and December 2022, the project staff analyzed the results of the user interviews and began drafting the research memorandum.

Work Plan :
 

Board Meetings	Topics to Be Considered	Research Activity
April 2023	Discuss specific language describing short-term purpose; consider recommendations related to reconciliations, if appropriate.
May and June 2023	Discuss linkage of inflows and outflows of short-term financial resources to revenue and expense and review draft standards for governmental funds (especially paragraph 14).
August 2023	Redeliberate issues related to effective date and transition and transition, including timing in relationship to revenue and expense.
September 2023	Discuss first draft of a final standards section; cost-benefit considerations; scope of authority.
October/ November 2023	Review comprehensive illustrations.
January 2024	Discuss preballot draft of a final Statement.
March 2024	Discuss ballot draft of a final Statement and consider for approval.

FINANCIAL REPORTING MODEL—RECENT MINUTES

Minutes of Meetings, February 21–23, 2023

The Board continued redeliberations on the revised language regarding an exception to applying the short-term financial resources measurement focus and accrual basis of accounting for long-term financings issued for short-term purposes. The Board began by discussing examples of long-term financings and whether they should be classified as being for short-term or long-term purposes. Based on that discussion, the Board tentatively decided that the determination of whether a financing is for a short-term purpose or a long-term purpose should focus on legal restrictions of the long-term financing rather than actual use of the long-term financing.

Next, the Board discussed potential paths forward to address the exception for short-term purposes, including (1) replacing short-term purposes with short-term transactions, eliminating the need to describe short-term purposes; (2) retaining the phrase short-term purpose but taking a conceptual approach and not describing short-term purposes in a final Statement; (3) replacing short-term purpose in its entirety with other than a long-term purpose, which shifts the focus to describing a long-term purpose instead of a short-term purpose; and (4) retaining and developing a description of a short-term purpose. The Board did not reach a tentative decision on a path forward and directed the staff to compile a summary of prior Board deliberations on the exception to applying the short-term financial resources measurement focus and accrual basis of accounting for long-term financings issued for short-term purposes to supplement further deliberations at a future meeting.

Minutes of Meetings, January 30, 2023

The Board discussed the results of staff research with users of financial statements regarding governmental fund reconciliations and unusual and infrequent criteria as presented in a research memorandum. No formal deliberations took place, and no tentative Board decisions were reached.

Minutes of Meetings, January 10–11, 2023

The Board continued redeliberations by discussing feedback received on the proposals regarding communication of major component unit information in the Exposure Draft, Financial Reporting Model Improvements.

First, the Board discussed the communication method of major component unit information. The Board tentatively decided to carry forward to a final Statement the proposal in the Exposure Draft to present major component unit information in the basic financial statements with changes made to require separate presentation of information for each major component unit rather than to present the information in a separate column.

Next, the Board discussed other suggestions provided in the feedback received from the Exposure Draft related to major component unit information. This feedback recommended (1) clarifying or redefining the requirements related to determining a major component unit, (2) changing the terminology for which component units should be reported separately from major component units to significant component units, and (3) clarifying whether the proposals related to major component units relate to blended component units. The Board tentatively decided not to incorporate any of these suggestions raised by respondents related to budgetary comparison information in a final Statement.

Minutes of Meetings, November 16–18, 2022

The Board continued redeliberations by discussing feedback received on the proposals regarding budgetary comparison information in the Exposure Draft, Financial Reporting Model Improvements.

First, the Board discussed the communication method of budgetary comparison information. The Board tentatively decided to carry forward to a final Statement the proposal in the Exposure Draft to present budgetary comparison information as required supplementary information (RSI).

Next, the Board discussed the presentation of budgetary variances. The Board tentatively decided to carry forward to a final Statement the proposals in the Exposure Draft to require the presentation of variances between (1) the original budget and final budget amounts and (2) the final budget amount and actual results as part of the budgetary comparison schedule.

The Board then discussed the analysis of those budgetary variances. The Board tentatively decided to carry forward to a final Statement the proposals in the Exposure Draft to require that the notes to RSI include an analysis of significant variations between (1) the original budget and final budget amounts and (2) the final budget amounts and actual results.

Finally, the Board discussed other suggestions provided in the feedback received from the Exposure Draft related to budgetary comparison information. This feedback recommended including (1) additional examples of illustrations of reconciliations to GAAP basis amounts, (2) prior year actual amounts in the budgetary comparison schedules, (3) the presentation of budgetary information for all major funds in RSI, (4) additional guidance on how encumbrances rolled forward from the preceding years, (5) additional guidance on the level of detail required in budgetary comparison schedules, and (6) the disclosure of the next fiscal period’s budgets. The Board tentatively decided not to incorporate any of these suggestions raised by respondents related to budgetary comparison information in a final Statement.

Minutes of Meetings, August 24–26, 2022

The Board continued redeliberations by discussing two issues related to the presentation of the proprietary fund statement of revenues, expenses, and changes in fund net position.

The Board tentatively decided that contributions to permanent and term endowments should be classified as nonoperating revenues to retain the information value of the operating income (loss) subtotal and the operating income (loss) and noncapital subsidies subtotal.

In addition, the Board tentatively decided that the proposed description of nonoperating revenues and expenses should be modified to identify contributions to permanent and term endowments as a fifth item separate from subsidies.

Finally, the Board discussed the proposed definition of subsidies and the analysis of whether specific transactions meet the definition. Those transactions included (1) payments in lieu of taxes, (2) contributions and grants, (3) intergovernmental revenue, (4), third-party payments, and (5) internal scholarship allowances.

Minutes of Meetings, July 13–14, 2022

The Board continued redeliberations by discussing feedback received on the proposals regarding the presentation of the proprietary fund statement of revenue, expenses, and changes in fund net position and the statistical section in the Exposure Draft, Financial Reporting Model Improvements.

The Board tentatively decided to carry forward the proposal in paragraph 31 of the Exposure Draft related to the definition of operating revenues and expenses and the description of nonoperating revenues and expenses to a final Statement with a modification to the proposed exception to indicate that certain loan programs should classify interest revenue as operating revenue and interest expense as nonoperating expense.

The Board then discussed the proposed definition of subsidies and tentatively decided to revise the proposed definition to (1) indicate that all transfers are included, (2) clarify that subsidies can have a direct or an indirect impact on user fees and charges, and (3) clarify that subsidies should be classified as noncapital subsidies unless limited to capital purposes. The Board also directed the staff to provide additional analysis of whether specific transactions including payments in lieu of taxes, internal scholarship allowances, intergovernmental revenues, contributions and grants, endowment gifts, and third-party payments meet the definition of subsidies. Additionally, the Board directed the staff to further evaluate whether modifications to the proposed guidance should be made to address the appropriate classification of endowments.

Lastly, the Board tentatively decided to retain and carry forward to a final Statement (1) the proposed format of the proprietary fund statement of revenues, expenses, and changes in fund net position and (2) the proposal to update the financial trends information in the statistical section for governments engaged only in business-type activities or only in business-type and fiduciary activities to include operating, noncapital subsidy, and other nonoperating revenues and expenses.

Minutes of Meetings, June 1–2, 2022

The Board continued redeliberations by discussing feedback received on the proposals regarding unusual or infrequent items in the Exposure Draft, Financial Reporting Model Improvements. The Board tentatively decided to retain and carry forward the proposals in the Exposure Draft to separately present unusual or infrequent items in a final Statement. The Board also tentatively decided to reexamine the existing guidance related to the unusual nature and infrequency of occurrence criteria in Statement No. 62, Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements. The Board directed the staff to conduct research and to further explore improvements to the criteria.

In addition, the Board tentatively decided (1) not to include examples of unusual or infrequent items in a final Statement, (2) to clarify that unusual or infrequent items include both inflows of resources and outflows of resources, (3) to clarify that inflows of resources and outflows of resources related to an unusual or infrequent item should be displayed separately on the statements of resource flows and should not be netted, and (4) to retain and carry forward the proposal to disclose whether an unusual or infrequent item is within the control of management.

Minutes of Meetings, April 19–21, 2022

The Board continued redeliberations by discussing feedback received on the proposals in the Exposure Draft, Financial Reporting Model Improvements, with consideration of management’s discussion and analysis (MD&A). The Board tentatively decided to retain and carry forward the proposals in the Exposure Draft to a final Statement with the following modifications:

1. Allow for professional judgment when determining what information is unnecessarily duplicative
2. Eliminate the requirement to reference the summary of significant accounting policies note disclosure, if appropriate
3. Retitle the section Introduction to Overview of the Financial Statements and retitle the section Significant Capital Asset and Long-Term Debt Activity to Significant Capital Asset and Long-Term Financing Activity
4. Provide additional clarification that the comparison of the government-wide condensed financial information should distinguish between governmental activities and business-type activities
5. Remove the requirement to provide an analysis of nonmajor funds in the aggregate and require only an analysis of balances and transactions of each major fund
6. Include an analysis of all significant long-term financing activity beyond long-term debt, lease, public-private and public-partnership, and subscription-based information technology arrangement activity
7. Cross-reference paragraphs 8c and 8d of the Exposure Draft to emphasize that paragraph 8d is providing additional analysis of capital assets and long-term financing activity
8. Clarify the intent of including the subsequent year’s budget information in the section on currently known facts, decisions, or conditions
9. Clarify that all actions (regardless of when the actions are taken) that are expected to have a significant effect on financial position (net position) or that are expected to produce significant differences from current-period results of operations should be included in MD&A.

In addition, the Board tentatively decided (1) not to expand the proposal to also reduce the duplication of information that is included within the notes, (2) not to limit MD&A to a specific number of pages or present a “Notes to MD&A Discussion” section after the notes to financial statements, and (3) not to include a requirement in a final Statement to discuss Environmental, Social, and Governance risks or general, long-term financial priorities in MD&A.

Minutes Archive

FINANCIAL REPORTING MODEL—TENTATIVE BOARD DECISIONS TO DATE

The Board tentatively decided the following:

• Governmental funds should continue to be presented as part of the basic financial statements.
• Governmental fund financial statements should not be presented applying a government’s budgetary basis of accounting.
  
• The economic resources measurement focus and accrual basis of accounting should not be applied to the governmental fund financial statements.
• The current financial resources measurement focus and modified accrual basis of accounting should not be retained and modified.  
• The name of the measurement focus for governmental fund financial statements should be short-term financial resources measurement focus.
• The name of the basis of accounting for governmental fund financial statements should be modified accrual basis of accounting.
• The governmental fund financial statements should be titled, the short-term financial resources balance sheet and the statement of short-term financial resource flows.
• The current and noncurrent terminology should be used for the governmental fund statement of short-term financial resource flows.
• The inflows of resources and outflows of resources terminology should be used in the governmental fund statement of short-term financial resource flows.
• The statement of short-term financial resource flows should be presented using the current- and noncurrent-activity format.
• The recognition terms for the short-term financial resources measurement focus and accrual basis of accounting for governmental funds (short-term method) should be the terms of the binding arrangement (or estimated payments if there is no binding arrangement or the binding arrangement does not include specific payment terms).
• The recognition method for long-term transactions or events in the short-term method should be based on the inception date of the transaction.
• The recognition period of the short-term method should be one year.
• In the short-term method, financial assets include cash, assets that are available to be converted to cash, and assets that are consumable in lieu of cash. All liabilities are financial liabilities.
• The relevant component part used in the short-term method and the recognition unit of account used in the revenue and expense project are two different accounting notions and should be retained as such.
• Assets recognized in governmental funds include certain prepaid items.
• If payments are made or received prior to the due date, elements from long-term transactions and other events should be recognized when payments are made or received.
• Applicability to the period for outflows of resources and inflows of resources in the short-term method should be determined using the concept of interperiod equity.
• Interfund events should be recognized as short-term transactions.
• Additional guidance for allowance for doubtful accounts and receivables not paid by their due date is not appropriate. Inflows of resources arising from short-term transactions are recognized when the underlying transaction occurs, and inflows of resources arising from long-term transactions are recognized when payments are due.
• Liabilities should be recognized when a government is required to make payments that extend beyond one year from the inception of the transaction to finance a fixed amount for a short-term purpose. In the final Statement, examples of this exception should include not only tax anticipation notes and revenue anticipation notes with payment terms that extend beyond one year from inception of the transaction, but also wage settlements and accounts payable with similar extended payment terms.
• Reclassification of a transaction or other event should be made if amendments are made to the terms or conditions of the original binding arrangement that warrant such a change from short term to long term or vice versa prior to the fiscal year-end based on the concepts for the short-term method.
• Reclassification of a transaction or other event as either short term or long term for amendments made subsequent to the fiscal year-end but prior to the issuance of the financial statements should not be allowed.
• If a new binding arrangement is entered into, that transaction should be classified and reported.
• Inflows of short-term financial resources and outflows of short-term financial resources should include on-behalf payments for fringe benefits and salaries.
• With the exception of direct vendor financings for short-term purposes, which should be reported as fund liabilities, direct vendor financings should be recognized as assets or outflows of short-term financial resources and inflows of short-term financial resources.
• A liability and an asset should be recognized in governmental funds related to escheat property from a long-term transaction for all amounts expected to be paid to claimants, including the percentage that is paid to claimants beyond one year of receipt.
• Recognition guidance for irrevocable split-interest agreements in governmental funds should not be removed.
• For irrevocable split-interest agreements in governmental funds in which the government is the intermediary and that arise from long-term transactions, (1) assets should be recognized for financial assets received, such as cash and investments; (2) deferred inflows of resources should be recognized for the government’s beneficial interest; and (3) a liability should be recognized for the third party’s beneficial interest.
• For irrevocable split-interest agreements in governmental funds in which a third party is the intermediary and that arise from short-term transactions, assets and a related deferred inflow of short-term financial resources should be recognized for the government’s beneficial interest.
• For irrevocable split-interest agreements in governmental funds in which a third party is the intermediary and that arise from long-term transactions, an asset and inflow of short-term financial resources should be recognized when payments are due.
• Land (and capital assets) held as an investment should be reported as investments in governmental funds.
• Investments not reported at fair value should be reported as investments in governmental funds.
• Nonspendable fund balance should be reported for amounts that are not in spendable form.
• An additional explanation highlighting that governmental fund financial statements do not contain the same information as presented for governmental activities in the government-wide financial statements should not be included at the top of the governmental fund financial statements.
  
• Nonauthoritative illustrations should be included in a final Statement.
• For management’s discussion and analysis (MD&A):
  • The length of MD&A should not be limited to a specific number of pages and MD&A should not present “Notes to MD&A Discussion” after notes to financial statements.
  • A requirement to discuss Environmental, Social, and Governance (ESG) risks or general, long-term financial priorities should not be included.  The Board confirmed that ESG risks are not in the scope of this project.
  • The users of MD&A should be the broad type of users discussed in paragraph 63 of Concepts Statement 1, Objectives of Financial Reporting.
  • The requirement to present a brief discussion of the basic financial statements, including the relationships of the statements to each other, and the significant differences in the information they provide, should continue to be required with additional clarification and structure.
  • The requirement and illustrations for the analysis of year-to-year changes should emphasize the level of thoroughness of the analysis and should include the relative magnitude of the reasons for changes.
  • The requirements should indicate that the analysis should be presented in a manner that avoids unnecessary duplication and allow for professional judgment when determining what information is unnecessarily duplicative.
  • The requirement to avoid duplication in the analysis in MD&A should not be expanded to reduce duplication of information that is included within the notes.
  • The requirement to present a brief discussion of the basic financial statements, including the relationships of the statements to each other, and the significant differences in the information they provide, should continue to be required with additional clarification.
  • The requirement to reference to the summary of significant accounting policies note should not be required.
  • The section titled Introduction should be amended to Overview of the Financial Statements and the section titled Significant Capital Asset and Long-Term Debt Activity should be amended to Significant Capital Asset and Long-Term Financing Activity.
  • The requirement to present the condensed current-year and prior-year financial information derived from the government-wide financial statements should distinguish between governmental activities and business-type activities.
  • The requirement to present an analysis of balances and transactions of nonmajor funds in the aggregate should not be required.
  • The requirement to include a description of significant capital assets and all long-term financing activity during the year should be included in the analysis.
  • A cross-reference of paragraphs 8c and 8d of the Exposure Draft should be included to emphasize that paragraph 8d is providing additional analysis of capital assets and long-term financing activity.
  • The discussion of significant variations between the original and final budget amounts and between the final budget amounts and actual results for the general fund should be presented as notes to budgetary comparison information, which is proposed to be presented as required supplementary information.
  • The requirement to present information about infrastructure assets accounted for using the modified approach should be removed.
  • The requirement to include a description of currently known facts, decisions, or conditions that are expected to have a significant effect on financial position or results of operations should include in the description examples, if applicable, of the following:
    • Trends in economic data, including population growth, customer base, and unemployment rates
    • Details of the subsequent year’s adopted or approved budget, including (1) the change in rates and bases (2) the changes in planned spending with reference to sources such as inflation, labor contracts with unions, adjustments, and whether new programs
      were added; and (3) expected changes in fund balance.
    • The intent of the subsequent year’s budget information should be included to highlight
      how the subsequent year’s budget will have a significant impact on the financial statements.
    • Information related to all actions the government has taken (regardless of when
      the actions are taken) related to postemployment benefit plans, capital improvement
      plans, and long-term debt.
• Unusual or infrequent items should be presented individually as the last presented flow(s) of resources prior to the net change in resource flows in the government-wide, governmental funds, and proprietary funds statements of resource flows.
• Unusual or infrequent items should include both inflows of resources and outflows of resources.
• Inflows of resources and outflows of resources related to unusual or infrequent items should be displayed separately on the government-wide, governmental funds, and proprietary funds statements of resource flows and should not be netted.
• Information regarding whether an unusual or infrequent item is within the control of management should be disclosed in the notes to financial statements.
• Examples of unusual or infrequent items should not be provided in a final Statement.
• Operating revenues and expenses should be defined as revenues and expenses other than nonoperating revenues and expenses. Nonoperating revenues and expenses should be described as (1) subsidies received and provided, (2) revenues and expenses related to financing, (3) resources from the disposal of capital assets and inventory, (4) investment
  income and expenses, and (5) contributions to permanent and term endowments.
• The exception to the guidance for classification of operating and nonoperating revenues and expenses should indicate that certain loan programs should classify interest revenue as operating revenue and interest expense as nonoperating expense.
• The definition of subsidies should be revised to (1) indicate that all transfers should be included, (2) clarify that subsidies can have a direct or indirect impact on user fees and charges, and (3) clarify that subsidies should be classified as noncapital subsidies unless limited to capital purposes.
• The statement of revenues, expenses, and changes in fund net position should distinguish between operating and nonoperating revenues and expenses, as well as separately report noncapital subsidies and provide a subtotal for operating income (loss) and noncapital subsidies.
• For governments engaged only in business-type activities or only in business-type and fiduciary activities, financial trend information in the statistical sections should distinguish between operating, noncapital subsidy, and other nonoperating revenues and expenses.
• Contributions to permanent and term endowments should be classified as nonoperating revenues.
• Budgetary comparison information should be presented as RSI.
• Variances between the original budget and final budget amounts and between the final budget amount and actual results should be presented as part of the budgetary comparison schedule.
• An analysis of significant variations between the original budget and final budget amounts and final budget amounts and actual results should be included in notes to RSI.
• Major component unit information should be separately presented in the reporting entity’s statements of net position and activities if it does not reduce the readability of the statements. If presenting information about each major component unit separately reduces the readability of the statements, combining statements of major component units should be included in the reporting entity’s basic financial statements after the fund financial statements.
• The determination of whether a financing is for a short-term purpose or a long-term purpose should focus on the legal restriction of the long-term financing.