Following is an example of a Straight-Line Depreciation Analysis report. The purpose of a Straight-Line Depreciation Analysis report is threefold:
In the following Straight-Line Depreciation Analysis sample report, you can see that the sample association has the following measures of reserve fund status:
To summarize what was said above so you can view the numbers in the above report:
NOTE: Board members commonly make the mistake of choosing the Straight-Line Depreciation Analysis method of funding and assuming they only need to fund their reserve budget enough to offset their "FY2005 Funding Requirement" (
$41,275 in this case) for depreciation expected to occur in FY 2005. This is fine if the association is 100% funded for depreciation-to-date.
However if the association is running a reserve deficit, as in this example where they only have
18.3% of the cash in reserves necessary to offset depreciation-to-date, they also need to get serious about reducing their unfunded depreciation liability. In other words, they'll need to supplement their reserve funding plan to offset the
$41,275 of annual reserve depreciation with extra funds to reduce their unfunded depreciation liability.
The
Optimized Cash Flow Analysis method determines a reserve funding plan that will help reduce the reserve deficit, but doesn't guarantee the association's reserves will be 100% funded during all years. For more information, refer to the
Cash Flow Analysis page.
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