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Straight line how do we calculate?
The amount of the current year contribution to each reserve account shall be the sum of the following two calculations:
1. The amount necessary, if any, to bring a negative account balance to zero.
2. The total estimated deferred maintenance expense or estimated replacement cost of the reserve component less the estimated balnce of the reserve account as of the beginning of the period for which the budget will be in effect.
The remainder, if greater than zero, shall be divided by the estimated remining useful life of the asset.
The formla may be adjusted each year for changes in estimates and deferred maintenance performed during the year and may consider factors such as inflation and earnings on invested funds.
Pooling How do we calculate?
If the association maintains a pooled account of two or more of the requred reserves assets the amount of the contribution to the pooled reserv account as disclosed on the proposed budget shall be not:
less than required to ensure that the balance on hand at beginning of the period for which the budget will go into effect plus the projected annual cash inflows over the remaining outlfows over the reamining estimated useful lives of all of the assets that make up the reserve pool, based on the current reserve analysis.
- The projected annual cash inflows may include estimated earnings from investment of principal. The reserve funding formula shall not include any type of balloon payments.
- FAC 61B-22
In other words
Combined expenditures are simply offset with existing pooled reserves and future contributions.
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