When is a component unit presented discretely in the primary government financial statements?

A component unit is presented discretely in the primary government financial statements when the criteria for blended presentation are not met. This occurs when the relationship between the component unit and the primary government does not warrant a combined reporting approach.

Blended presentation generally applies when the component unit is so closely related to the primary government that it is essentially part of the government itself. For example, if the primary government has significant control over the component unit or if the component unit provides services exclusively to the primary government, blended presentation may be appropriate.

However, if these conditions are not satisfied—such as when the component unit operates independently or has a significant level of autonomy—it should be reported discretely. This means it will be included in the financial statements as a separate entity, ensuring that users of the financial reports can distinguish between the financial activities of the primary government and its component units. This discrete presentation provides clearer information about the resources and obligations of each entity, thus enhancing transparency and accountability in financial reporting.