Norwalk, Conn. (May 29, 2002) -- The Governmental Accounting Standards Board has issued a new standard on accounting for organizations that are closely related to a primary government.

Statement No. 39, Determining Whether Certain Organizations Are Component Units, provides criteria for determining whether organizations, such as not-for-profit foundations related to public universities and school districts, should be reported as component units based on the nature and significance of their relationship with a state or local government. The statement amends Statement 14. Copies of Statement 39 can be found online at www.gasb.org.

Under the standard, state and local governments that have qualifying fundraising foundations would be required to include the financial activities of those foundations in their financial statements. Previously, many governments didn't report the financial activities of those foundations in their financial statements.

"In the present reporting environment, some entities include in their financial statements the balances and transactions of their related fundraising organizations, whereas others either disclose limited information in the notes or provide no information at all. The standard should bring a greater level of comparability to financial reporting," said GASB Project Manager Ken Schermann.

The standard sets forth criteria on which a government is required to provide a discrete presentation that publishes financial information about its own activities as well as those of the affiliated organization. Generally, a legally separate, tax-exempt, fundraising organization whose primary purpose is to raise or hold significant resources for the benefit of a specific governmental unit, should be included as a component unit of that governmental unit's financial reporting entity.

-- Electronic Accountant Newswire staff

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