Final answer:
According to GASB standards, blending occurs when the financial information of a component unit becomes part of the financial statements of the primary government.
Step-by-step explanation:
According to GASB standards, blending occurs when the financial information of a component unit becomes part of the financial statements of the primary government.
In accounting, a component unit is a legally separate organization whose financial activities are considered part of another entity for financial reporting purposes. This happens when the component unit is financially integrated with the primary government, meaning that the primary government is financially accountable for the component unit. The blending of financial information occurs to provide a comprehensive and accurate representation of the primary government's financial position and results of operations.
For example, if a city government has a housing authority that is legally separate but financially dependent on the city, GASB standards require the city to blend the housing authority's financial information with its own financial statements. This allows stakeholders to see the full financial picture of the city government, including its operations, assets, liabilities, and revenues.