What makes an asset a “Reserve Component” item versus an “Operating Component” item?
A “Reserve Component” is an item that is the responsibility of the association to maintain, has a limited useful life, predictable remaining useful life expectancies, typically occurs on a cyclical basis that exceeds 1 year, and costs above a minimum threshold cost. An “Operating Component” expense is typically a fixed expense that occurs on an annual basis. (this is a wrong statement Maybe ) For instance, minor repairs to a roof for damage caused by high winds or other weather elements would be considered an “operating” expense. However, if the entire roof needs to be replaced because it has reached the end of its life expectancy, then the replacement would be considered a reserve expense.
