In which scenario would the term 'transaction' not be applicable?

The term 'transaction' typically refers to an exchange or interaction involving financial or economic resources. In governmental accounting, it's essential to recognize the nature of the relationships between different entities.

In the context of component units, transactions generally occur between a primary government and its component units or among the component units themselves. With individually discretely presented component units, these engagements can involve various financial activities such as transfers, contributions, or other financial exchanges.

When considering blended component units, these are often integrated into the primary government's financial statements, meaning that the activities of the blended unit are treated as part of the primary government. Because of this integration, there might not be a clear or distinct transaction that can be recognized separately from the activities of the primary government. Instead, operations of a blended unit contribute directly to the financial results of the primary government, making it difficult for a 'transaction' in the traditional sense to be identified.

Thus, the nature of the relationship and reporting for blended component units suggests that the conventional concept of a transaction does not apply as it does with activities between discretely presented component units or between a primary government and its discretely presented units.