AGA GAFRB Exam - Topic 2 Question 3 Discussion

Actual exam question for AGA's GAFRB exam

Question #: 3
Topic #: 2

A legally separate organization for which the elected officials of the primary government are financially accountable describes a

Afiscally dependent organization.

Bcomponent unit.

Cjoint venture entity.

Djointly governed organization.

Show Suggested Answer

Suggested Answer: B

A component unit is a legally separate entity for which the elected officials of the primary government are financially accountable. This accountability may arise if the primary government:

Appoints a majority of the governing board, and

Is able to impose its will or has the potential to receive financial benefits or bear financial burdens.

Component units are reported in the financial statements of the primary government, either as blended or discretely presented entities.

Relevant Standards and Reference:

GASB Statement No. 14, The Financial Reporting Entity

GASB Statement No. 61, The Financial Reporting Entity: Omnibus

GASB Codification Section 2100: Defining the Financial Reporting Entity

Therefore, Option B is correct.

by Cecil at Jul 03, 2025, 05:35 AM

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Rolland

5 months ago

Wait, are we sure about that? Sounds off.

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Mendy

5 months ago

Totally agree, B is the right answer!

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Marcos

6 months ago

Interesting, I never knew that distinction before!

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Belen

6 months ago

I thought it was a joint venture entity, but I guess not.

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Gerardo

6 months ago

It's definitely a component unit.

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Tu

6 months ago

I vaguely recall that component units are related to financial accountability, so I’m leaning towards option B, but I could be wrong.

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Mindy

7 months ago

I'm a bit lost on this one. I feel like I need to review the differences between joint ventures and component units again.

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Weldon

7 months ago

I remember practicing a question similar to this, and I think the answer was definitely component unit. It just fits the definition better.

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Eun

7 months ago

I think this might be about component units, but I'm not entirely sure if it could also refer to fiscally dependent organizations.

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I'm feeling pretty confident about this one. The description matches the definition of a component unit, which is a legally separate organization for which the elected officials of the primary government are financially accountable.

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Blair

7 months ago

Okay, let me break this down. The key is that the elected officials of the primary government are financially accountable for this separate organization. That sounds like a component unit to me.

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Willard

7 months ago

Hmm, I'm a bit unsure about this one. I'll need to re-read the question and think through the definitions of these different types of organizations.

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Lezlie

8 months ago

This question seems straightforward, I think the answer is B - component unit.

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Fallon

10 months ago

B) component unit makes the most sense to me. Legally separate, but financially accountable to the primary government. Sounds like a classic component unit scenario.

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Jacqueline

8 months ago

B) component unit makes the most sense to me.

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Aja

8 months ago

A) fiscally dependent organization.

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Avery

10 months ago

Ha, this question is a real head-scratcher! Maybe the answer is C) joint venture entity, and the primary government is just really bad at managing their finances.

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Melinda

8 months ago

No, I believe it's A) fiscally dependent organization, because the primary government has financial control over it.

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Bethanie

8 months ago

I think the answer is actually B) component unit, where the primary government is financially accountable for the separate organization.

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Alana

10 months ago

I believe it's B) component unit because the primary government has financial accountability.

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Dion

10 months ago

I'm not sure, but I think it could also be A) fiscally dependent organization.

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Ashlyn

10 months ago

I'm going with D) jointly governed organization. That sounds like the best fit to me, though I'm not 100% confident.

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Nidia

9 months ago

I agree with you, B) component unit seems like a good fit for the description.

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Glory

9 months ago

I think B) component unit might be the correct answer.

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Carol

10 months ago

Hmm, I'm not sure. Could it also be a fiscally dependent organization? Seems like the primary government has some financial control over it.

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Kerry

10 months ago

B) component unit.

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Regenia

10 months ago

A) fiscally dependent organization.

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Gilberto

11 months ago

I think the answer is B) component unit. The description sounds like a legally separate organization that the primary government is financially accountable for.

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