The two different approaches ar ethe depreciation approach adn the modified approach.
The depreciation approach is what we are most commonly used to seeing. General repairs are expensed while improvements to extend the life of the asset as well as additions to existing infrastructure are capitalized. Then there is depreciation, that is of course expensed. These two different totals, expense and capital assets are netted together to give the book value of the asset.
The modified approach is much more complex. Instead of capitalizingthe improvements to the additions to exisitng infrastructure, these costs are expensed and no depreciation is in effect. This approach is used to extend the life of infrastructure assets. But in order to use modified, the government must meet two conditions.
The first condition is that it has an asset management system that a)keeps up-to-date inventory of eligible infrasturcture assets, b) performs conditions assessments of those eligible infrastructure assets at least every three years with a consistent measurement scale, C) lastly, it estimates each year the annual amount to maintain and preserve those assets at the condition level at or above the established and disclosed government condition. The second requirement is that the government must document that the eligible infrastructure assets are being maintained at a level at or above the condition level established an disclosed by the government.
The two different approaches ar ethe depreciation approach adn the modified approach.
ReplyDeleteThe depreciation approach is what we are most commonly used to seeing. General repairs are expensed while improvements to extend the life of the asset as well as additions to existing infrastructure are capitalized. Then there is depreciation, that is of course expensed. These two different totals, expense and capital assets are netted together to give the book value of the asset.
The modified approach is much more complex. Instead of capitalizingthe improvements to the additions to exisitng infrastructure, these costs are expensed and no depreciation is in effect. This approach is used to extend the life of infrastructure assets. But in order to use modified, the government must meet two conditions.
The first condition is that it has an asset management system that a)keeps up-to-date inventory of eligible infrasturcture assets, b) performs conditions assessments of those eligible infrastructure assets at least every three years with a consistent measurement scale, C) lastly, it estimates each year the annual amount to maintain and preserve those assets at the condition level at or above the established and disclosed government condition.
The second requirement is that the government must document that the eligible infrastructure assets are being maintained at a level at or above the condition level established an disclosed by the government.