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Will you give an example of an accounting problem that follows the Modified Approach for Reporting...

Will you give an example of an accounting problem that follows the Modified Approach for Reporting Infrastructure?

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Assume that two governments each construct the same type of infrastructure subsystem at a total cost of $40 million. Further assume that Government A chooses to use depreciation accounting (estimated useful life of 40 years), whereas Government B elects to use the modified approach. Finally, assume that Government B fails to maintain targeted condition levels at the end of 30 years and therefore must convert to depreciation accounting for the remaining estimated useful life of the asset (i.e., 10 years).What would be the depreciation effect?

Answer:

Depreciation Expense Depreciation Expense
Period Government A Government B
Years 1-30 $1 Million/year $0/year
Years 31-40 $1 Million/year $4 Million/year
Total 40 years $40 Million $40 Million  
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