Recently, the Generally Accepted Accounting Practices (GAAP) were updated for the reserve or replacement fund for community associations. In the past, the reserve fund contributions were recognized in the year they were assessed and unspent reserves were reported in a replacement fund balance. As of the fiscal year 2019, the replacement contribution will be recognized only when the money is spent on a replacement fund expense.
Prior:
- Record money going into the reserve fund as they are assessed to the unit owners
- Record money going out of the reserve fund as they occur
Current:
- Record money coming into the reserves only as the money is used for an expense
If your association is collecting money and producing a financial report by someone other than a CPA, your balance sheet may continue to look the same. However, your audit, compilation or review performed by a CPA would show a large portion (if not all) of reserves as a deferred revenue. CPA’s may need to charge additional funds to change the current financial process to the new accounting practices.
Talk to your accountant about the new GAAP rules and how they affect your association.
