Deferred maintenance refers to the postponement of maintenance and repairs activity on infrastructure and other machinery which is necessary to maintain those on condition and ensure performance.
Government defers maintenance when there are shortage of funds. But due to such deferment the infrastructure may deteriorate leading to loss of machinery and also efficiency of workforce resulting in loss of reputation for a company.
Role in governmental financial reporting,
The treatment of maintenance would be to expend the same as period costs as there is no value addition.
So if the government defers maintenance it would lead to increased revenue for a shorter period during which such deferment has made. Increased revenue not based on the functioning but based on the deferment of expenses is not a good presentation of financial statements and may lead to misunderstanding about the functioning.
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