TechFlash

Sage FAS Asset Accounting has half year set as the default depreciation convention in the tax-related books (Tax, State, AMT, and ACE). In a normal year, this is fine. However, if you place more than 40% of your qualifying (MF 200) assets into service in the last three months of the year, you are required to use the Midquarter convention. This article will show you how to determine if you are in this situation, and how to change the convention in Sage FAS Asset Accounting.

FAS Asset Accounting provides an easy way to determine if you need to use the Midquarter convention by running a Midquarter Applicability Report. After entering all of your new assets for the year, launch this report by going to Reports\Tax Forms and Worksheets, and select Mid-quarter Applicability.

The selection will bring up this dialog box:

After selecting the book and entering a fiscal year end, push the Execute button. This report will appear:

The report totals the depreciable basis of the applicable property. It also gives you the amount and percentage that was placed in service in the first nine months, and the amount and percentage that was placed in service in the last three months of the year. In addition, a message indicates whether you have exceeded the 40% threshold that would trigger the Midquarter convention. In this case, we have triggered this limit.

Now that that we know that the Midquarter convention is required, how do we get Sage FAS Asset Accounting to calculate it? The convention that an asset uses is assigned by FAS Asset Accounting when an asset is first depreciated. If depreciation has already been run in the Tax book using the default half year convention, the first step will be to remove it.

To remove the incorrect convention, the affected assets will need to have their depreciation reset. First, set up a group of active, current-year assets. You can do this through Group manager by creating a group with the following Group Criteria: The Activity is Currently A, and the Placed in Service Date (Tax) is between 01/01/05 and 12/31/05, or whatever are the appropriate dates for your Fiscal Year.

In the Group View, bring this Group up and then hit the Select All button.

Then go to Depreciation\Reset Depreciation. This dialog box will appear:

As shown above, select your tax-related books, reset to the Placed-in-Service date, and be sure to select "Clear MACRS Conv?" under "Other." Then push the OK button. This will reset the depreciation and will clear the half year convention.

The next step is to set the Midquarter convention and run depreciation. To set the Midquarter convention, go to File\Edit Company, and select the Book Overrides tab. In each of the tax-related books (Tax, State, AMT, ACE, and any others that may have been set up), go to the row that is labeled "Midquarter" and change the selection from the Half Year default value to Midquarter. When finished, push the OK button. After running depreciation, these values should be restored to their default, Half Year values.

Finally, run depreciation on your group. The assets will now show "m" in the Keycode Column, which indicates the Midquarter convention has been set.

Once the Midquarter convention has been set on the current year assets, you can re-run your reports with the corrected depreciation numbers. This allows you to successfully report the depreciation that is allowed in this Midquarter year.