Fixed assets

What are Fixed Assets in a Homeowner Association?

Fixed assets, also known as capital assets, are tangible assets owned by a homeowner association that are used over a long period of time, usually over a year. These assets are not intended for resale but are used to facilitate the association’s daily operations. They include, but are not limited to, buildings, land, vehicles, equipment, and improvements other than buildings such as roads, sidewalks, and swimming pools.

These assets are considered ‘fixed’ because they are not easily converted into cash and are not expected to be consumed or converted into cash within a normal operating cycle. They are essential for maintaining the quality of life in a homeowner association, as they help to provide and maintain the amenities and services that the association offers to its members.

Accounting for Fixed Assets

In the accounting books of a homeowner association, fixed assets are recorded at their original cost and then depreciated over their useful life. The depreciation expense represents the allocation of the cost of the asset over the years it is expected to be in use. However, land is an exception to this rule as it is not depreciated because land does not wear out or get used up.

It’s important for homeowner associations to keep a detailed and accurate record of their fixed assets for financial reporting and planning purposes. It helps the association to estimate future expenses for replacing or repairing the assets as they wear out or become obsolete. Additionally, in case of disputes or litigation, these records can provide necessary evidence.