The GASB flowchart can be used to guide decisions on whether and how to incorporate a potential component unit.

A town's library system is a legally constituted government entity. It is governed by a 10-person board. Six of the members are appointed by the town's council; the other four are selected by the other members of the board. The members serve staggered terms of three years. Once appointed, the members can be removed from office only for illegal activities.

The town provides 95 percent of the library system's resources and thereby can control the total amount spent by the system. However, the governing board adopts the system's budget, and the budget need not be approved by the town. The board also controls the day-to-day operations of the system.

Using the flowchart presented in the text, indicate whether and, if so, how the town should incorporate the library system into its own financial statements. (Granof, 01/2019, p. 509)

Granof, M. H., Khumawala, S. B., Calabrese, T. D., Smith, D. L.(01/2019). Government and Not-for-Profit Accounting: Concepts and Practices,8th Edition [VitalSource Bookshelf version].Retrieved from vbk://9781119495819

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