Which of the following can lead to the conclusion that a component unit should be blended into the financial statements?

Blending a component unit into the financial statements of the primary government is based on specific criteria regarding the relationship and operational similarities between the government and the component unit. The selected answer highlights that if the component unit operates similar services to the primary government, it justifies blending because the operational integration indicates that the unit functions in a manner that is closely aligned with the government’s objectives. This close operational relationship signifies that the financial results of the component unit are relevant to the primary government’s financial statements, thereby necessitating their consolidation for a clearer representation of the fiscal status and service delivery of the government as a whole.

In contrast, factors such as financial independence, community service alone, or legally separate status do not provide a direct justification for blending. Financial independence indicates that the component unit can stand on its own without the primary government's support; this independence often prevents blending. Serving the community, while indicative of purpose, does not establish a financial or operational link necessary for blending. Similarly, having a legally separate status typically requires the component unit to be reported discretely. Thus, the operational similarities are a key factor in deciding to blend financial statements, emphasizing the interconnectedness of services provided.