Posting a credit memo to Fixed Asset

Does the suggested method of reducing the cost basis field (within the link below) cause issues with reporting the cost for periods prior to the amendment.

https://learn.microsoft.com/en-gb/troubleshoot/dynamics/gp/the-ability-to-apply-credit-memo-from-payables-management-to-asset

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Microsoft Dynamics GP

Applying a credit memo directly to a fixed asset reduces its cost basis but can impact historical reporting and depreciation calculations. Instead, use an adjustment transaction or disposal/reacquisition to maintain accuracy and compliance.

The suggested method in the provided Microsoft article involves applying a credit memo from Payables Management to a Fixed Asset, which reduces the cost basis of the asset. However, this approach can impact reporting, particularly for historical periods. Below is a breakdown of the potential issue and an alternative approach.

Impact on Reporting for Prior Periods

Restating Historical Cost – Reducing the cost basis directly modifies the asset’s value, which may affect reports showing historical asset cost. If financial statements were already finalized, this could create discrepancies.
Depreciation Recalculation – Depending on your depreciation settings, reducing the cost basis may trigger a recalculation of prior depreciation, leading to unexpected changes in reported figures.
Audit Trail Issues – Some accounting policies require maintaining an unaltered historical cost. Adjusting the cost basis directly may not align with these policies.

Recommended Alternative Approach

Instead of directly reducing the cost basis, consider the following:

Enter a Fixed Asset Disposal and Reacquire at the Adjusted Cost
- If the adjustment is significant, consider disposing of the asset and reacquiring it at the correct cost. This maintains a clear audit trail.
Use a Fixed Asset Adjustment Transaction
- Navigate to Fixed Assets > Adjustments and enter an adjustment to reduce the asset’s cost while keeping prior period reports intact.
Record the Credit Memo as a Vendor Refund and Adjust the Asset Separately
- Post the credit memo in Accounts Payable as a refund and then process a separate Fixed Asset Adjustment to reduce the asset’s book value. This ensures that reporting remains consistent for prior periods.

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