What is the practical effect of a government electing to use the modified approach for infrastructure reporting?

The practical effect of a government choosing the modified approach for infrastructure reporting primarily revolves around the reporting of depreciation expense. When a government uses this approach, it isn't required to report depreciation on its infrastructure assets. Instead, under the modified approach, governments must demonstrate that their infrastructure assets are being maintained at a certain condition level and provide information about the assessed condition, along with the spending required to maintain that condition.

This method allows governments to focus on asset management and the maintenance of public infrastructure rather than traditional depreciation calculations, which can be more complex and require estimates of asset lives and salvage values. The emphasis is on providing accountability and transparency regarding the condition and upkeep of the assets instead of simply booking depreciation expenses on the financial statements.

The other options do not accurately represent the implications of the modified approach. The modified approach still requires governments to report their infrastructure assets in their financial statements, so it would be incorrect to say they need not report them. Similarly, improvements made to infrastructure assets are still relevant and would need to be reported for ensuring the condition levels are maintained; thus, it’s not accurate to state that improvements do not need to be reported.