GASB clarifies majority equity interest reporting rules
 

GASB clarifies majority equity interest reporting rules

The definition of an acquisition is the dividing line in state and local governments’ accounting for the majority equity interest in an organization that remains legally separate after acquisition, according to clarifying guidance issued Tuesday by GASB.

Statement No. 90, Majority Equity Interests, explains that a government’s majority equity interest in a legally separate organization should be reported as an investment if that equity interest meets GASB’s definition of an investment.

If the majority equity interest in a legally separated entity does not meet the definition of an investment, Statement 90 requires a government to report the legally separate entity as a component unit.. Read more on the Journal of Accountancy.