Discussion:Condo Reserves and Capital Expenses
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Discussion Forum Index --> Accounting Questions --> Condo Reserves and Capital Expenses
| 14 October 2009 | |
| I am working on the budget for our condo association (in FL). A question came up of what is the proper treatment of capital expenditures. Our association depleted our pooled reserves by $210K in 2009. This will require the reserves to be replenished in 2010, which would create a higher reserve expense for the association. Is there any way to "capitalize" the building repair expenditures (they were really capital expenditures, involving changes in the building infrastructure) and make them part of the reserve account to help prevent the replenishment of the reserve? I was hoping there was an appropriate way of creating a capital asset and depreciating it over a reasonable time to credit the association for these capital repairs instead of expensing them in one year. | |
| 14 October 2009 | |
| Replenishing the reserves would not create higher reserve expense, those are considered capital contributions to the reserve fund. You generally do not capitalize reserve expenditures for building repairs since those assets usually are not on the books of the Association. Keep in mind that reserve fund transactions are really contained in the equity section of the balance sheet and are not part of the "operations" of the Association. If you use a fund presentation this is more readily apparent. | |
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