replacement reserve

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Replacement Reserve

In real estate accounting, money set aside to purchase new materials that are expected to be bought as older materials wear out and need to be replaced. The replacement reserve may be listed on a financial statement as a phantom expense, and may be credited back if it is not actually spent.

replacement reserve

An amount of money set aside because building components or equipment will wear out in a relatively short time and need to be replaced.Replacement reserves can be a mere accounting entry as a phantom expense item reducing net operating income each month, or it can be money actually deposited into an account and earmarked for replacements.If the money is set aside into a separate account,any contract for the purchase of that property or business should include a clause addressing who gets the money—the purchaser or seller.When purchasing a condo or co-op,or a home in a planned unit development,the buyer should make sure there are adequate cash replacement reserves for the future.If not, then repairs will not be made or they will be made only after assessments against all owners.

References in periodicals archive ?
The county's policy requires maintenance of a general fund operating reserve equal to at least 75-100 days worth of budgeted general fund expenditures.
WSSC's multiyear fiscal plan envisions ongoing, aggressive efficiency efforts but Fitch expects financial flexibility to be maintained because of the water and wastewater utility's unused GO taxing power, affordable rates relative to local income levels, gradual reductions in debt levels, and prudence in increasing its operating reserve to offset revenue variations.
If an operating reserve of less than one-and-a-half percent is unavoidable, a Stage Three will be initiated.
At closing, an operating reserve account will be established and funded at $2.
We expect to skate by at the peak with just under 5 percent operating reserves,'' said Kellan Fluckiger, the ISO's chief operating officer.
STAGE 1 EMERGENCY Operating reserves forecast to fall to between 7% - 6%
Additionally, Kalamazoo typically allocates a large portion of its operating reserves to capital projects, providing a significant degree of financial flexibility.
The district has generated a significant buildup in operating reserves in a financially challenging environment; this trend reflects the sound, conservative fiscal management that is a credit strength for the district.
These markets are used to allocate space on the transmission lines, maintain operating reserves and match supply with demand in real time.
Preliminary results for fiscal 2006 suggest a further sizeable increase in operating reserves.
The underlying 'A' rating reflects Mabank ISD's favorable financial profile, characterized by generally positive operating results and satisfactory operating reserves.
Recent improvement in several key financial measures, including sales tax receipts, tax base growth, and operating reserves, suggests the economic recovery continues to strengthen in the city.