Your Strata Has a Depreciation Report. Now What?

The depreciation report arrives.

It is dozens of pages long. It contains tables, estimates, building components, projected replacement dates and some very large numbers.

Council reviews it.

Everyone agrees it looks important.

Then it gets saved in a folder.

Sound familiar?

A depreciation report is most valuable when it becomes part of the strata's financial decision-making, not when it simply satisfies a requirement.

Think of It as a Financial Roadmap

For strata corporations with five or more lots, BC now generally requires a new depreciation report at least once every five years. Current reports include a 30-year projection of major maintenance, repair and replacement costs and at least three CRF cash-flow funding models.

Those models may use different combinations of CRF contributions, special levies and borrowing.

That gives council something extremely valuable: a view of the financial decisions that may lie ahead.

Start With the Next Five Years

Thirty years is difficult to visualize.

Five years is much easier.

Identify the larger projects expected during that period. Then ask:

What does the report estimate they will cost?

How much money is currently available?

How much will be contributed before the work occurs?

Have any projects moved forward or backward since the report was prepared?

Are the estimates still reasonable?

Suddenly, the depreciation report becomes much more practical.

Do Not Treat Estimated Dates as Appointments

If a report says a roof may require replacement in 2030, that does not mean contractors should arrive on January 1, 2030.

Building components can perform better or worse than expected. Costs change. Repairs can extend useful life. New information becomes available.

BC requires reports to be updated because conditions, replacement costs, investment returns and inflation assumptions can change.

Council should use the report as a planning tool, not as a rigid construction schedule.

Connect It to the Annual Budget

This is where the report becomes especially useful.

When preparing the next budget, compare the recommended funding approaches with the strata's actual CRF balance and expected projects.

If the numbers are drifting apart, council can begin discussing the issue early.

A gradual increase in funding is usually a much easier conversation than an unexpected

request for thousands of dollars from each owner.

One Report, Many Better Decisions

A good depreciation report can help council discuss priorities, CRF contributions, future levies, investment timing and the financial consequences of postponing work.

The report provides the roadmap.

Council still has to decide which route to take.

Next week: We move from long-term planning to the numbers council sees every month. What are your strata's financial statements actually telling you?

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