Which of the following statements is TRUE regarding major fund reporting for proprietary funds?

The statement indicating that "the 10 percent and 5 percent criteria should apply to both operating and nonoperating revenues and expenses" is correct in the context of major fund reporting for proprietary funds. Major fund reporting for governmental accounting identifies major funds based on specific criteria. When determining whether a proprietary fund is considered a major fund, governments use certain thresholds. The criteria include that a fund must meet either the 10 percent or the 5 percent test in relation to total revenues, expenditures, or expenses across all proprietary funds. This applies to both operating and nonoperating revenues and expenses, ensuring that the overall financial performance of the fund is evaluated comprehensively.

Understanding these thresholds is crucial because it helps provide consistent reporting standards and aids stakeholders in assessing the fiscal health of these funds. The distinction between operating and nonoperating revenues and expenses is significant in reflecting the true economic activity of the fund.

On the other hand, while major fund reporting indeed examines special items and extraordinary items, the focus on specifically applying the 10 percent and 5 percent criteria to the categories mentioned is more accurately represented in the context of revenues and expenses. Therefore, the other statements do not accurately describe the application of the criteria in the same way that the selected correct statement does