Translation, Please! Understanding Your Building's Financial Statements

Whether you’re a co-op or condo owner or on your building’s board, you are considered a primary user of the property’s financial statements. As such, you should definitely make it a point to understand what you’re looking at–to not only be aware of the financial health of your building but to discern certain trends and relationships and anticipate the future. Other users include potential buyers, lenders, vendors, taxing authorities and insurers. As a result, financial statements are meant to present condensed organized summaries of extensive detailed financial information.

The objective of these documents is to communicate the economic effects of completed transactions and certain other events on the financial position and operations of the co-op or condo.

The financial statements of a co-op or condo contain the same basic information as that of a commercial business. The statements include the balance sheet, statement of revenues, expenses and accumulated surplus or deficit (also known as retained earnings), statement of cash flows and notes to the financial statements.

Building boards should use the financial statements in conjunction with a well-organized management report. The management report should be specifically designed to provide internal decision-makers with detailed, sometimes confidential, information needed to control and monitor the day-to-day operations of the co-op or condo.

Know What You’re Looking At

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4 Comments

  • I have noticed on my Co op that the accumulated deficit keep increasing. The revenues do exceed the expenses by a small amount before depreciation. That depreciation expense is offset with the equity in the Co op. Is this room for concern? Equity will soon be negative.
  • Does corporate law require that the Co-op have an AUDITED Finacial budget (yearly) for shareholders...
  • This was incredibly helpful! Is there a reasonable deficit in retained earning with which a co-op can operate?
  • Line Item Question: On my building's Financial Statement, the managing agent has allowed the accountant to aggregate all legal &accounting fees with all other professional fees. FYI- Litigation against Shareholders is rampant, and the fees gathered and spent are not itemized. Is this in line with GAAP? What, if anything, is the recourse to shed light on this veiled area of reporting?