Where does it go?

2011, a Victoria Day Long weekend in Alberta where it didn’t snow!
Although somewhat rare, it was definitely a pleasant experience. We all know that predicting how the weather is going to be on any long weekend is difficult. It might be even more difficult to stay awake long enough to read through this e-zine and for this I apologize in advance, but the topic keeps coming up…

Property Managers and Board members know that within the budgeting and accounting processes, some of the hardest questions to answer involve the process of how to correctly categorize expenditures. Are they maintenance, capital or capital improvement expenses?

While some items are very easy to distinguish, others are more difficult. Before we can attempt to categorize where to place the expense, we have to broadly define what each of the categories are.

In Alberta, the Condominium Property Act suggests that a Capital Expenditure (reserve fund expenditure) is an expense that is comprised of major repairs and replacement of any real and personal property owned by the corporation and the common property, where the repair or replacement is of a nature that does not normally occur annually.

A Capital improvement is the cost that is related to making changes to improve the capital assets which may increase their useful life or add to the value of these assets. Capital improvements can include structural improvements or other significant renovations to a building and they may enhance usefulness or productivity of a component.

By default then could a maintenance item be considered any repairs or replacement of a component that is not a capital expenditure or a capital improvement?

How do you determine the correct classification for each expenditure? Well of course the best answer is to hire Delta Appraisal as your Reserve Fund Study provider. Otherwise we will attempt to provide some of the answers in a future e-zine.

At Delta Appraisal, we work with property managers and board members to set realistic budgets and to prioritize maintenance and repair projects. Our functional Reserve Fund Studies are unbiased and we are not competitors in property management or maintenance.

For more information about Delta Appraisal and our easy to read, functional Reserve Fund Studies or to request a competitive quote, please contact us.

If you have a topic that you would like to see in a future newsletter, please let us know. We are always looking for new ideas and would be happy to give you credit for your topic. Please send your ideas to delta@telus.net.

Delta Appraisal Corporation www.deltaappraisal.ca Reserve Fund Studies and Insurance Appraisals 11810 Kingsway Avenue Edmonton, AB T5G 0X5 Ph: 780.469.2993 Fax: 780.401.3129 E-mail: delta@telus.net Ernie Paustian CRP, RPA, AACI, P. App. General Manager

CRP Certified Reserve Planner (Real Estate Institute of Canada) AACI Accredited Appraiser Canadian Institute (Appraisal Institute of Canada)

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