How to Discontinue a Reclassification

It might be necessary to discontinue a Reclassification mid-year. If so, you must perform an additional step to ensure that the data is accurate for the period after the process is stopped.

For example, you have a Reclassification from Jan through October (assuming the Jan – Dec fiscal year) and you cease the Reclassification in November. Due to the calculation of the YTD/MTD values generated by the Reclassification Entry, this will cause the November values to be off by the reversal of the October entry for the Reclassification Entry. This is because the system assumes that YTD=0 when a zero value is calculated (i.e. Reclassification stops and no value is recorded for November). Therefore, it will calculate MTD based on YTD. When the assumption is YTD=0, MTD will have to reverse the previous month’s entry to get the YTD value to 0 (i.e. Debit of 125,458 in October would then be credited for (125,458) in November to achieve a YTD=0 in November as the Reclassification stopped).

When this situation occurs (stopping reversal mid-year), it may be necessary to perform a “reversing” entry in the month after the process is ended. To use the Reclassification example above where the Reclass is active for Jan – Oct and then becomes Inactive in November, perform the following steps.

1. Set the End Period to October in the Reclassification Entry. This will stop the execution of the Reclassification in November as November will not be considered as an Active period.

2. Then due to the reversal of the October Reclassification in November (assuming a Flow type account in Reclassification), book a Standard Journal Entry or Dynamic Journal Entry referencing the November reversal amounts with the opposite signs (if the November entry is a debit then credit, and vice versa). Once posted in November then there are no additional entries required for December as the reversal is a one-time entry only. This will ensure that the data that has been posted is in the correct accounts for reporting purposes.

Notes:

The above action will apply for Income Statement (Flow type accounts) only as the Normal Data Input Type is MTD for these accounts. The Balance Sheet (Balance type accounts) will calculate correctly as the Normal Data Input Type is YTD for these types of accounts. This situation is consistent across all the processes (Reclassification, Non Controlling Interest, etc.) within the Consolidation Module. If the process is executed for the entire year then there is no issue as the entries that are booked will be reversed in the following month and that will carry all the way to the end of the year with no roll forward from December to January (to use our Jan-Dec fiscal year) as we start the YTD values over again in January.