Capital Improvements vs Reserve Expenses
Reserve Expenses vs Operating Expenses
Three Most Unusual Reserve Components
While conducting hundreds of Reserve Study site inspections each year, our team of Reserve Specialists occasionally run into some rather interesting assets that pass the Component List 4-part test and thus should have their repair or replacement costs reserved for.
Why are components “Lumped Together” in a Reserve Study?
This was a good question asked recently by a client. They wanted to see all the separate items in their equipment shed in their Reserve Component List, not all the mowers grouped together, or the small runabouts grouped together.
Is it a Maintenance Expense or a Reserve Expense?
A reader recently asked a good question, asking for clarification about where the money should come from for a particular expense. The answer illustrates an important concept.
Is it a Reserve Component (or a Capital Improvement)?
Interesting question, and not always clear. First we go to National Reserve Study Standards and the definition there of a Reserve component. A Reserve Component must pass all the following four tests:
1) that it is a common area maintenance responsibility
2) that it has a limited life
3) that it has a predictable remaining useful life
4) that it is above a minimum threshold cost of significance.