What is the journal entry impact when making a critical depreciation change?

Question

I need to increase the acquisition value on an asset placed in service 9/2017 by $48K. Will Sage do a catch up entry in the G/L when I run depreciation for my current period close for July 2019? How do I get the depreciation on the $48K to start from Jan 2019?

Bob Mc · Answer

Hello, Sonya, 
 Assuming you make the change effective with the Current Through Date which is the general rule, when you increase the acquisition value by $48K, it will potentially leave the asset in an under-depreciated state. I write "potentially" because it depends on the depreciation method. If you are using the RV method, e.g., the program will automatically perform the "catch-up" over the remaining life of the asset. 
 If, however, you are using a straight-line method, then the asset will become under-depreciated. How the adjustment will then be handled by the program is determined by your Adjustments options which are set in the Book Overrides tab in your company settings. If, e.g., the option is set to Immediate, then after making a change to your critical field, an immediate adjustment will be made which will give you the "catch-up" amount that you are looking for although it will appear as a "spike" in your depreciation expense figures. But it will be included in your next depreciation run and therefore will post to your G/L. But if your Adjustments option is set to None, no adjustment will be made and the asset will continue to depreciate, but never fully unless you make another change to the asset such as changing the depreciation method as I mentioned in my leading paragraph. 
 How can you start the change effective in January 2019? You would first have to either recalculate or reset depreciation to December 2018. Ensure the Adjustments option is set according to your company policy for handling adjustments, and then make the change effective with the Current Through Date. Personally, I don't see a compelling reason to do that. If the depreciation is posted in January or in July, isn't it still within your same FY? 
 By the way, Sonya, the issue of making critical field changes and the implications when assets are rendered under-depreciated are topics taught in the Intermediate Depreciation class offered through Sage U.

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What is the journal entry impact when making a critical depreciation change?

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