I live in a small condo HOA. Recently, they constructed an addition to the monument signs. It's really ugly and no longer matches the style of the homes. But, that is another story. They spent a sizable amount of money on the addition. Raising a questions about accounting for the new asset. The money spent to complete the project came from surplus dues paid in 2010. The board refused to refund the surplus or lower the dues and carry it over into 2011, to offset the difference. The monument signs were already fully depreciated and not funded by the reserves. Should the addition to the signs be capitalized and depreciated on the books? Does it have to be a funded item in the reserves to be capitalized? If so, what benefits would we see on the taxes for a non-profit whose only source of income is dues, reimbursements, fines, & interest? Are there any negatives for not capitalizing it?
