Carol-CRX said:

ie: item number 100, is inactive inventory (ballet shoe) in 2014.
If I reassign item no. 100 to an active service (tap class) in 2016, will our yearly reports be affected?

Accounting reports, no.  The transactions will be unaffected.  Inventory reports, yes!  A listing of all the 2014 inventory assets will no longer include something that is not currently an asset.   A listing of the active service items for all years will show prior years' transactions from when the item was linked to an asset.

Inventory Ledger items and inventory transactions have no fiscal year in the way that G/L Accounts do.  

Carol-CRX said:

Will a 2014 report (printed in 2017) continue show it as inventory, while a 2016 report (printed in 2017) show it as a service?

No.  The menu that connects to the query that makes the report works entirely off the what the Inventory Ledger list shows at that moment.   If you right now change item 100 to be a spark plug, it will show on every report as '100 Spark Plug' no matter what period the report is for.

 - If you want to shuffle a load of no longer used items to the end of the inventory list, put 'ZZZ ' in front.  

 - If you want the items to not show in most reports and pick lists, you can make them inactive.

 - If the items haven't been used in an eon, and all invoices associated with them are purged, and you never want to know anything about them, then Sage 50 will allow you to delete them.    

The ability to change an item from 'Item' to 'service' to 'Item' is meant to be there for setup, to fix things that were wrong - i.e. you may have set up the books to charge for ballet shoes as inventory items, then decided that you want to charge for the temporary use of them as a service, while keeping them on your books as an asset.

Changing an inventory item that has transactions, to a completely different thing, is almost the data equivalent of shredding and cross-cutting your paper records.