diff --git a/api/v2alpha1/helmrelease_types.go b/api/v2alpha1/helmrelease_types.go
index d7c69431a..9c7d8e55c 100644
--- a/api/v2alpha1/helmrelease_types.go
+++ b/api/v2alpha1/helmrelease_types.go
@@ -563,10 +563,18 @@ func (in Uninstall) GetTimeout(defaultTimeout metav1.Duration) metav1.Duration {
 
 // HelmReleaseStatus defines the observed state of HelmRelease
 type HelmReleaseStatus struct {
-	// ObservedGeneration is the last reconciled generation.
+	// ObservedGeneration is the last observed generation.
 	// +optional
 	ObservedGeneration int64 `json:"observedGeneration,omitempty"`
 
+	// ObservedStateReconciled represents whether the observed state has been successfully reconciled.
+	// +optional
+	ObservedStateReconciled bool `json:"observedStateReconciled,omitempty"`
+
+	// LastObservedTime is the last time at which the HelmRelease was observed.
+	// +optional
+	LastObservedTime metav1.Time `json:"lastObservedTime,omitempty"`
+
 	// Conditions holds the conditions for the HelmRelease.
 	// +optional
 	Conditions []Condition `json:"conditions,omitempty"`
@@ -592,15 +600,18 @@ type HelmReleaseStatus struct {
 	// +optional
 	HelmChart string `json:"helmChart,omitempty"`
 
-	// Failures is the reconciliation failure count.
+	// Failures is the reconciliation failure count against the latest observed state.
+	// It is reset after a successful reconciliation.
 	// +optional
 	Failures int64 `json:"failures,omitempty"`
 
-	// InstallFailures is the install failure count.
+	// InstallFailures is the install failure count against the latest observed state.
+	// It is reset after a successful reconciliation.
 	// +optional
 	InstallFailures int64 `json:"installFailures,omitempty"`
 
-	// UpgradeFailures is the upgrade failure count.
+	// UpgradeFailures is the upgrade failure count against the latest observed state.
+	// It is reset after a successful reconciliation.
 	// +optional
 	UpgradeFailures int64 `json:"upgradeFailures,omitempty"`
 }
@@ -617,27 +628,13 @@ func (in HelmReleaseStatus) GetHelmChart() (string, string) {
 // HelmReleaseProgressing resets any failures and registers progress toward reconciling the given HelmRelease
 // by setting the ReadyCondition to ConditionUnknown for ProgressingReason.
 func HelmReleaseProgressing(hr HelmRelease) HelmRelease {
-	hr.Status.Failures = 0
-	hr.Status.InstallFailures = 0
-	hr.Status.UpgradeFailures = 0
+	resetFailureCounts(&hr)
+	hr.Status.ObservedStateReconciled = false
 	hr.Status.Conditions = []Condition{}
 	SetHelmReleaseCondition(&hr, ReadyCondition, corev1.ConditionUnknown, ProgressingReason, "reconciliation in progress")
 	return hr
 }
 
-// SetHelmReleaseCondition sets the given condition with the given status, reason and message
-// on the HelmRelease.
-func SetHelmReleaseCondition(hr *HelmRelease, condition string, status corev1.ConditionStatus, reason, message string) {
-	hr.Status.Conditions = filterOutCondition(hr.Status.Conditions, condition)
-	hr.Status.Conditions = append(hr.Status.Conditions, Condition{
-		Type:               condition,
-		Status:             status,
-		LastTransitionTime: metav1.Now(),
-		Reason:             reason,
-		Message:            message,
-	})
-}
-
 // HelmReleaseNotReady registers a failed release attempt of the given HelmRelease.
 func HelmReleaseNotReady(hr HelmRelease, reason, message string) HelmRelease {
 	SetHelmReleaseCondition(&hr, ReadyCondition, corev1.ConditionFalse, reason, message)
@@ -646,9 +643,11 @@ func HelmReleaseNotReady(hr HelmRelease, reason, message string) HelmRelease {
 }
 
 // HelmReleaseReady registers a successful release attempt of the given HelmRelease.
-func HelmReleaseReady(hr HelmRelease, reason, message string) HelmRelease {
-	SetHelmReleaseCondition(&hr, ReadyCondition, corev1.ConditionTrue, reason, message)
+func HelmReleaseReady(hr HelmRelease) HelmRelease {
+	resetFailureCounts(&hr)
+	hr.Status.ObservedStateReconciled = true
 	hr.Status.LastAppliedRevision = hr.Status.LastAttemptedRevision
+	SetHelmReleaseCondition(&hr, ReadyCondition, corev1.ConditionTrue, ReconciliationSucceededReason, "release reconciliation succeeded")
 	return hr
 }
 
@@ -665,6 +664,25 @@ func HelmReleaseAttempted(hr HelmRelease, revision string, releaseRevision int,
 	return hr, changed
 }
 
+func resetFailureCounts(hr *HelmRelease) {
+	hr.Status.Failures = 0
+	hr.Status.InstallFailures = 0
+	hr.Status.UpgradeFailures = 0
+}
+
+// SetHelmReleaseCondition sets the given condition with the given status, reason and message
+// on the HelmRelease.
+func SetHelmReleaseCondition(hr *HelmRelease, condition string, status corev1.ConditionStatus, reason, message string) {
+	hr.Status.Conditions = filterOutCondition(hr.Status.Conditions, condition)
+	hr.Status.Conditions = append(hr.Status.Conditions, Condition{
+		Type:               condition,
+		Status:             status,
+		LastTransitionTime: metav1.Now(),
+		Reason:             reason,
+		Message:            message,
+	})
+}
+
 const (
 	// ReconcileAtAnnotation is the annotation used for triggering a
 	// reconciliation outside of the defined schedule.
diff --git a/api/v2alpha1/zz_generated.deepcopy.go b/api/v2alpha1/zz_generated.deepcopy.go
index 93b9603d3..2dffa35bf 100644
--- a/api/v2alpha1/zz_generated.deepcopy.go
+++ b/api/v2alpha1/zz_generated.deepcopy.go
@@ -207,6 +207,7 @@ func (in *HelmReleaseSpec) DeepCopy() *HelmReleaseSpec {
 // DeepCopyInto is an autogenerated deepcopy function, copying the receiver, writing into out. in must be non-nil.
 func (in *HelmReleaseStatus) DeepCopyInto(out *HelmReleaseStatus) {
 	*out = *in
+	in.LastObservedTime.DeepCopyInto(&out.LastObservedTime)
 	if in.Conditions != nil {
 		in, out := &in.Conditions, &out.Conditions
 		*out = make([]Condition, len(*in))
diff --git a/config/crd/bases/helm.toolkit.fluxcd.io_helmreleases.yaml b/config/crd/bases/helm.toolkit.fluxcd.io_helmreleases.yaml
index f3e3467c3..9f3e591b9 100644
--- a/config/crd/bases/helm.toolkit.fluxcd.io_helmreleases.yaml
+++ b/config/crd/bases/helm.toolkit.fluxcd.io_helmreleases.yaml
@@ -384,7 +384,8 @@ spec:
                   type: object
                 type: array
               failures:
-                description: Failures is the reconciliation failure count.
+                description: Failures is the reconciliation failure count against
+                  the latest observed state. It is reset after a successful reconciliation.
                 format: int64
                 type: integer
               helmChart:
@@ -392,7 +393,8 @@ spec:
                   created by the controller for the HelmRelease.
                 type: string
               installFailures:
-                description: InstallFailures is the install failure count.
+                description: InstallFailures is the install failure count against
+                  the latest observed state. It is reset after a successful reconciliation.
                 format: int64
                 type: integer
               lastAppliedRevision:
@@ -407,16 +409,26 @@ spec:
                 description: LastAttemptedValuesChecksum is the SHA1 checksum of the
                   values of the last reconciliation attempt.
                 type: string
+              lastObservedTime:
+                description: LastObservedTime is the last time at which the HelmRelease
+                  was observed.
+                format: date-time
+                type: string
               lastReleaseRevision:
                 description: LastReleaseRevision is the revision of the last successful
                   Helm release.
                 type: integer
               observedGeneration:
-                description: ObservedGeneration is the last reconciled generation.
+                description: ObservedGeneration is the last observed generation.
                 format: int64
                 type: integer
+              observedStateReconciled:
+                description: ObservedStateReconciled represents whether the observed
+                  state has been successfully reconciled.
+                type: boolean
               upgradeFailures:
-                description: UpgradeFailures is the upgrade failure count.
+                description: UpgradeFailures is the upgrade failure count against
+                  the latest observed state. It is reset after a successful reconciliation.
                 format: int64
                 type: integer
             type: object
diff --git a/controllers/helmrelease_controller.go b/controllers/helmrelease_controller.go
index c81673a24..0e987531a 100644
--- a/controllers/helmrelease_controller.go
+++ b/controllers/helmrelease_controller.go
@@ -125,27 +125,38 @@ func (r *HelmReleaseReconciler) Reconcile(req ctrl.Request) (ctrl.Result, error)
 		return ctrl.Result{}, nil
 	}
 
-	if hr.Spec.Suspend {
-		msg := "HelmRelease is suspended, skipping reconciliation"
-		hr = v2.HelmReleaseNotReady(hr, v2.SuspendedReason, msg)
-		if err := r.Status().Update(ctx, &hr); err != nil {
-			log.Error(err, "unable to update status")
-			return ctrl.Result{Requeue: true}, err
-		}
-		log.Info(msg)
-		return ctrl.Result{}, nil
+	hr, result, err := r.reconcile(ctx, log, hr)
+
+	// Update status after reconciliation.
+	if updateStatusErr := r.updateStatus(ctx, &hr); updateStatusErr != nil {
+		log.Error(updateStatusErr, "unable to update status after reconciliation")
+		return ctrl.Result{Requeue: true}, updateStatusErr
 	}
 
-	// Observe the HelmRelease generation.
-	hasNewGeneration := hr.Status.ObservedGeneration != hr.Generation
-	if hasNewGeneration {
+	// Log reconciliation duration
+	log.Info(fmt.Sprintf("reconcilation finished in %s, next run in %s",
+		time.Now().Sub(start).String(),
+		hr.Spec.Interval.Duration.String(),
+	))
+
+	return result, err
+}
+
+func (r *HelmReleaseReconciler) reconcile(ctx context.Context, log logr.Logger, hr v2.HelmRelease) (v2.HelmRelease, ctrl.Result, error) {
+	// Observe HelmRelease generation.
+	if hr.Status.ObservedGeneration != hr.Generation {
 		hr.Status.ObservedGeneration = hr.Generation
 		hr = v2.HelmReleaseProgressing(hr)
+		if updateStatusErr := r.updateStatus(ctx, &hr); updateStatusErr != nil {
+			log.Error(updateStatusErr, "unable to update status after generation update")
+			return hr, ctrl.Result{Requeue: true}, updateStatusErr
+		}
 	}
 
-	if err := r.Status().Update(ctx, &hr); err != nil {
-		log.Error(err, "unable to update status")
-		return ctrl.Result{Requeue: true}, err
+	if hr.Spec.Suspend {
+		msg := "HelmRelease is suspended, skipping reconciliation"
+		log.Info(msg)
+		return v2.HelmReleaseNotReady(hr, v2.SuspendedReason, msg), ctrl.Result{}, nil
 	}
 
 	// Reconcile chart based on the HelmChartTemplate
@@ -159,25 +170,15 @@ func (r *HelmReleaseReconciler) Reconcile(req ctrl.Request) (ctrl.Result, error)
 			msg = "HelmChart is not ready"
 			r.event(hr, hr.Status.LastAttemptedRevision, recorder.EventSeverityInfo, msg)
 		}
-		hr = v2.HelmReleaseNotReady(hr, v2.ArtifactFailedReason, msg)
-		if err := r.Status().Update(ctx, &hr); err != nil {
-			log.Error(err, "unable to update status")
-			return ctrl.Result{Requeue: true}, err
-		}
-		return ctrl.Result{}, reconcileErr
+		return v2.HelmReleaseNotReady(hr, v2.ArtifactFailedReason, msg), ctrl.Result{}, reconcileErr
 	}
 
 	// Check chart artifact readiness
 	if hc.GetArtifact() == nil {
 		msg := "HelmChart is not ready"
-		hr = v2.HelmReleaseNotReady(hr, v2.ArtifactFailedReason, msg)
 		r.event(hr, hr.Status.LastAttemptedRevision, recorder.EventSeverityInfo, msg)
 		log.Info(msg)
-		if err := r.Status().Update(ctx, &hr); err != nil {
-			log.Error(err, "unable to update status")
-			return ctrl.Result{Requeue: true}, err
-		}
-		return ctrl.Result{}, nil
+		return v2.HelmReleaseNotReady(hr, v2.ArtifactFailedReason, msg), ctrl.Result{}, nil
 	}
 
 	// Check dependencies
@@ -187,14 +188,9 @@ func (r *HelmReleaseReconciler) Reconcile(req ctrl.Request) (ctrl.Result, error)
 			r.event(hr, hc.GetArtifact().Revision, recorder.EventSeverityInfo, msg)
 			log.Info(msg)
 
-			hr = v2.HelmReleaseNotReady(hr, v2.DependencyNotReadyReason, err.Error())
-			if err := r.Status().Update(ctx, &hr); err != nil {
-				log.Error(err, "unable to update status")
-				return ctrl.Result{Requeue: true}, err
-			}
 			// Exponential backoff would cause execution to be prolonged too much,
 			// instead we requeue on a fixed interval.
-			return ctrl.Result{RequeueAfter: r.requeueDependency}, nil
+			return v2.HelmReleaseNotReady(hr, v2.DependencyNotReadyReason, err.Error()), ctrl.Result{RequeueAfter: r.requeueDependency}, nil
 		}
 		log.Info("all dependencies are ready, proceeding with release")
 	}
@@ -202,32 +198,16 @@ func (r *HelmReleaseReconciler) Reconcile(req ctrl.Request) (ctrl.Result, error)
 	// Compose values
 	values, err := r.composeValues(ctx, hr)
 	if err != nil {
-		hr = v2.HelmReleaseNotReady(hr, v2.InitFailedReason, err.Error())
 		r.event(hr, hr.Status.LastAttemptedRevision, recorder.EventSeverityError, err.Error())
-		if err := r.Status().Update(ctx, &hr); err != nil {
-			log.Error(err, "unable to update status")
-			return ctrl.Result{Requeue: true}, err
-		}
-		return ctrl.Result{}, nil
+		return v2.HelmReleaseNotReady(hr, v2.InitFailedReason, err.Error()), ctrl.Result{}, nil
 	}
 
-	reconciledHr, reconcileErr := r.release(log, *hr.DeepCopy(), hc, values, hasNewGeneration)
+	reconciledHr, reconcileErr := r.release(ctx, log, *hr.DeepCopy(), hc, values)
 	if reconcileErr != nil {
 		r.event(hr, hc.GetArtifact().Revision, recorder.EventSeverityError, fmt.Sprintf("reconciliation failed: %s", reconcileErr.Error()))
 	}
 
-	if err := r.Status().Update(ctx, &reconciledHr); err != nil {
-		log.Error(err, "unable to update status after reconciliation")
-		return ctrl.Result{Requeue: true}, err
-	}
-
-	// Log reconciliation duration
-	log.Info(fmt.Sprintf("reconcilation finished in %s, next run in %s",
-		time.Now().Sub(start).String(),
-		hr.Spec.Interval.Duration.String(),
-	))
-
-	return ctrl.Result{RequeueAfter: hr.Spec.Interval.Duration}, reconcileErr
+	return reconciledHr, ctrl.Result{RequeueAfter: hr.Spec.Interval.Duration}, reconcileErr
 }
 
 type HelmReleaseReconcilerOptions struct {
@@ -295,7 +275,7 @@ func (r *HelmReleaseReconciler) reconcileChart(ctx context.Context, hr *v2.HelmR
 	return &helmChart, true, nil
 }
 
-func (r *HelmReleaseReconciler) release(log logr.Logger, hr v2.HelmRelease, source sourcev1.Source, values chartutil.Values, hasNewGeneration bool) (v2.HelmRelease, error) {
+func (r *HelmReleaseReconciler) release(ctx context.Context, log logr.Logger, hr v2.HelmRelease, source sourcev1.Source, values chartutil.Values) (v2.HelmRelease, error) {
 	// Acquire lock
 	unlock, err := lock(fmt.Sprintf("%s-%s", hr.GetName(), hr.GetNamespace()))
 	if err != nil {
@@ -342,20 +322,29 @@ func (r *HelmReleaseReconciler) release(log logr.Logger, hr v2.HelmRelease, sour
 	hr, hasNewState := v2.HelmReleaseAttempted(hr, revision, releaseRevision, valuesChecksum)
 	if hasNewState {
 		hr = v2.HelmReleaseProgressing(hr)
+		if updateStatusErr := r.updateStatus(ctx, &hr); updateStatusErr != nil {
+			log.Error(updateStatusErr, "unable to update status after state update")
+			return hr, updateStatusErr
+		}
 	}
 
 	// Determine release deployment action.
 	var deployAction v2.DeploymentAction
 	switch {
-	// Install if there is none.
+	// Install if there is no release.
 	case rel == nil:
 		deployAction = hr.Spec.GetInstall()
-	// Upgrade if there is a new generation, new state, or this is an upgrade retry.
-	case hasNewGeneration || hasNewState || hr.Spec.GetUpgrade().GetRemediation().GetFailureCount(hr) > 0:
-		deployAction = hr.Spec.GetUpgrade()
-	// Otherwise no action needed.
+	// Fail if the release was due to a failed install (which was not uninstalled).
+	// The uninstall may have failed, or was not needed due to retries being exhausted
+	// and remediateLastFailure being false.
+	case hr.Spec.GetInstall().GetRemediation().GetFailureCount(hr) > 0:
+		return hr, fmt.Errorf("last install failed but was not uninstalled")
+	// Skip and mark ready if the observed state was already reconciled.
+	case hr.Status.ObservedStateReconciled:
+		return v2.HelmReleaseReady(hr), nil
+	// Otherwise upgrade.
 	default:
-		return hr, nil
+		deployAction = hr.Spec.GetUpgrade()
 	}
 
 	// Check if retries exhausted.
@@ -405,17 +394,18 @@ func (r *HelmReleaseReconciler) release(log logr.Logger, hr v2.HelmRelease, sour
 					err = uninstallConditionErr
 				}
 			}
-		}
-	}
 
-	// Determine release revision after deployment/remediation.
-	rel, observeLastReleaseErr = observeLastRelease(cfg, hr)
-	if observeLastReleaseErr != nil {
-		err = &ConditionError{
-			Reason: v2.GetLastReleaseFailedReason,
-			Err:    errors.New("failed to get last release revision after deployment/remediation"),
+			// Determine release after remediation.
+			rel, observeLastReleaseErr = observeLastRelease(cfg, hr)
+			if observeLastReleaseErr != nil {
+				err = &ConditionError{
+					Reason: v2.GetLastReleaseFailedReason,
+					Err:    errors.New("failed to get last release revision after remediation"),
+				}
+			}
 		}
 	}
+
 	hr.Status.LastReleaseRevision = getReleaseRevision(rel)
 
 	if err != nil {
@@ -426,7 +416,12 @@ func (r *HelmReleaseReconciler) release(log logr.Logger, hr v2.HelmRelease, sour
 		}
 		return v2.HelmReleaseNotReady(hr, reason, err.Error()), err
 	}
-	return v2.HelmReleaseReady(hr, v2.ReconciliationSucceededReason, "release reconciliation succeeded"), nil
+	return v2.HelmReleaseReady(hr), nil
+}
+
+func (r *HelmReleaseReconciler) updateStatus(ctx context.Context, hr *v2.HelmRelease) error {
+	hr.Status.LastObservedTime = v1.Now()
+	return r.Status().Update(ctx, hr)
 }
 
 func (r *HelmReleaseReconciler) checkDependencies(hr v2.HelmRelease) error {
diff --git a/docs/api/helmrelease.md b/docs/api/helmrelease.md
index 2d7acab09..cbdaf827c 100644
--- a/docs/api/helmrelease.md
+++ b/docs/api/helmrelease.md
@@ -770,7 +770,33 @@ int64
 </td>
 <td>
 <em>(Optional)</em>
-<p>ObservedGeneration is the last reconciled generation.</p>
+<p>ObservedGeneration is the last observed generation.</p>
+</td>
+</tr>
+<tr>
+<td>
+<code>observedStateReconciled</code><br>
+<em>
+bool
+</em>
+</td>
+<td>
+<em>(Optional)</em>
+<p>ObservedStateReconciled represents whether the observed state has been successfully reconciled.</p>
+</td>
+</tr>
+<tr>
+<td>
+<code>lastObservedTime</code><br>
+<em>
+<a href="https://kubernetes.io/docs/reference/generated/kubernetes-api/v1.18/#time-v1-meta">
+Kubernetes meta/v1.Time
+</a>
+</em>
+</td>
+<td>
+<em>(Optional)</em>
+<p>LastObservedTime is the last time at which the HelmRelease was observed.</p>
 </td>
 </tr>
 <tr>
@@ -857,7 +883,8 @@ int64
 </td>
 <td>
 <em>(Optional)</em>
-<p>Failures is the reconciliation failure count.</p>
+<p>Failures is the reconciliation failure count against the latest observed state.
+It is reset after a successful reconciliation.</p>
 </td>
 </tr>
 <tr>
@@ -869,7 +896,8 @@ int64
 </td>
 <td>
 <em>(Optional)</em>
-<p>InstallFailures is the install failure count.</p>
+<p>InstallFailures is the install failure count against the latest observed state.
+It is reset after a successful reconciliation.</p>
 </td>
 </tr>
 <tr>
@@ -881,7 +909,8 @@ int64
 </td>
 <td>
 <em>(Optional)</em>
-<p>UpgradeFailures is the upgrade failure count.</p>
+<p>UpgradeFailures is the upgrade failure count against the latest observed state.
+It is reset after a successful reconciliation.</p>
 </td>
 </tr>
 </tbody>
diff --git a/docs/spec/v2alpha1/helmreleases.md b/docs/spec/v2alpha1/helmreleases.md
index 9b7b18657..24ada4d95 100644
--- a/docs/spec/v2alpha1/helmreleases.md
+++ b/docs/spec/v2alpha1/helmreleases.md
@@ -671,8 +671,10 @@ status:
     reason: ReconciliationSucceeded
     status: "True"
     type: Ready
+  observedStateReconciled: true
   lastAppliedRevision: 4.0.6
   lastAttemptedRevision: 4.0.6
+  lastObservedTime: "2020-07-13T13:18:42Z"
   lastReleaseRevision: 1
   observedGeneration: 2
 ```
@@ -703,6 +705,7 @@ status:
   failures: 1
   lastAppliedRevision: 4.0.6
   lastAttemptedRevision: 4.0.6
+  lastObservedTime: "2020-07-13T18:17:28Z"
   lastReleaseRevision: 1
   observedGeneration: 3
 ```