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Effectively, in the instance here, too much depreciation was posted as a
result of capitalizing the asset one year earlier. The requirement is to
write back the excess depreciation posted.
When you post a write up transaction, the retained earnings does not get hit
- only the p&l account gets a credit, which eventually flows into the
retained earnings at the end of the year. The BS account, of course, gets
adjusted immediately on posting the transaction. If the amount of write
up is material, you may want the auditors to qualify the abnormal credit to
P&L. In any case, if you hit the retained earnings directly with any
transaction, that would raise an audit flag.
NBV write ups are very common and I have not seen any RE adjustments being
done directly.
| | | ---------------Original Message---------------
From: Warren Nash
Sent: Saturday, October 08, 2011 10:17 AM
Subject: Asset Depreciation with Two Invoices of Different Dates
Question. ABZU is used when too much depreciation has been posted in previous fiscal years. But not because an asset was created in a previous financial year by mistake.
Wouldn't you need to adjust the BS and retained earnings for the incorrect values now? Or would all this be corrected by a normal EOY process in the current year after ABZU was done now?!
I think I have only done ABZU before when the "indexation" values given were to high.
Regards,
Waza |
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