![]() Understanding these concepts can help with presenting economic activity to the Board and membership as well as other stakeholders accurately and in accordance with Generally Accepted Accounting Principles (GAAP).Ĭondominium and homeowner associations (CIRAs) have unique requirements for reporting and presenting fixed assets. Knowing the definition of fixed assets is important because it can have a material impact on the balance sheet, income statement and statement of cash flows presented on the accrual basis of accounting. If an expenditure does not meet any of these criteria, then it is classified as a repair or maintenance expense. It adapts the fixed asset to be used in a new way.It enhances the overall value of the asset.The enhancement must fall into one of the following categories: ![]() ![]() To be capitalized as a fixed asset, the improvement must be expected to last for at least one year. A capital improvement is a major expenditure that enhances a fixed asset to such an extent that the improvement can be recorded as a fixed asset. Painting and minor repairs to property are considered to be non-capital expenses required to be expensed when incurred. These types of expenditures are also called period expenses because they generally benefit periods on a monthly basis or less than a year. Non-capital expenditures include expensed amounts typically found in the operating budget such as general maintenance, utilities, management fees and insurance. Examples of fixed assets include land, buildings, machinery and equipment and furnishings such as clubhouse furniture. Homeowner Associations are differentiated from Condominium Associations in that Homeowner Associations have a different legal framework and usually consist of single-family homes.įixed assets are non-liquid assets (not purchased to sell in the ordinary course of business and that have a long-term use, longer than a year). Therefore, in this article and in the context of Condominium and Homeowner Associations (CIRAs), capital assets will be equivalent to fixed assets. Capital expenses are also sometimes referred to as fixed assets. As a Certified Public Accountant, I am often asked to explain the difference between capital and non-capital expenses.
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