Which statement best describes major improvement expenses?

Which statement best describes major improvement expenses?

• A. They are routine maintenance tasks.
• B. They are always funded from reserves in the current year.
• C. They are budget items that last more than one year and increase property value.
• D. They are small repair costs.

Answer: (C)

Major improvement expenses are capital expenditures—costs for projects that extend the property’s life or add to its value. They’re planned in the association’s capital budget as items that last more than one year, and they’re typically funded from capital reserves or financing rather than the ordinary operating fund. That combination of a multi-year horizon and a positive impact on property value is what distinguishes these upgrades from routine maintenance or small repairs, which are usually expensed in the current year. Therefore, the description of budget items that last more than one year and increase property value best captures major improvement expenses.

Major improvement expenses are capital expenditures—costs for projects that extend the property’s life or add to its value. They’re planned in the association’s capital budget as items that last more than one year, and they’re typically funded from capital reserves or financing rather than the ordinary operating fund. That combination of a multi-year horizon and a positive impact on property value is what distinguishes these upgrades from routine maintenance or small repairs, which are usually expensed in the current year. Therefore, the description of budget items that last more than one year and increase property value best captures major improvement expenses.