Final answer:
The primary government must include a fiscally dependent entity in its financial reports if it represents a financial benefit or burden, as this inclusion provides a transparent view of the government's financial position.
Step-by-step explanation:
When a legally separate entity is fiscally dependent and represents a financial benefit or burden to a primary government, the primary government must include the entity in its financial reports. This requirement ensures that the financial statements accurately reflect the economic resources, obligations, and the overall financial health of the government, including its affiliated organizations.
Entities that are considered a financial benefit or burden are significant because they either contribute to or detract from the financial stability of the primary government. Consequently, the financial activities of such entities can significantly affect the primary government's financial statements. For this reason, Government Accounting Standards Board (GASB) standards typically require the inclusion of these entities to provide a complete and transparent view of the primary government's financial position to the public, investors, and creditors.