Short-Lived Components are those components of a building that do not require annual replacement but wear out before the end of the building's useful life and must be replaced periodically.
Short-lived components are generally recognized in a reconstructed cash flow statement using an allowance for reserves. Estimation of the allowance for reserves may be done using the straight-line method or the sinking fund method.
For example: A roof may have an expected economic life of 20 years while the building may last 75 years. Appliances may have an expected economic life of 15 years while the building is expected to last 60 years.
Short Lived Components generally include:
|•||Exterior paint (interior paint is usually considered maintenance)|
|•||Root covering, gutters, and downspouts|
|•||Heating and Air Conditioning|
|•||Electrical and plumbing fixtures|