NetAsset - Explanation of the True Up Amounts

Overview

A True Up revaluation in NetAsset is used to correct the financial records of an asset when the original capitalized value, accumulated depreciation, in-service date, useful life, or other depreciation parameters were entered incorrectly. Unlike a Write Up or Write Down, which adjusts forward-looking values, a True Up removes all balances NetAsset had previously posted for the asset and re-establishes the correct balances as of the revaluation date.

This article explains the accounting logic behind a True Up revaluation, including how the resulting journal entry is structured, how amounts can be verified, and how the go-live clearing account is handled.

Key Assumptions

• The asset has an in-service date and is not currently in an On Hold status. The True Up revaluation is available regardless of how the asset was originally entered, whether via a go-live transition entry or a standard capitalization entry.
• The user has already identified the correct values for the asset (e.g., corrected gross asset value, accumulated depreciation at in-service, useful life, in-service date).
• The True Up revaluation is being processed from NetAsset > Asset Revaluations > True Up.

How the True Up Journal Entry Is Calculated

When a True Up revaluation is processed, NetAsset performs the following steps to construct the revaluation journal entry:

1. Reverse all previously posted amounts. NetAsset queries the G/L impact of every transaction associated with the asset (capitalizations, go-live entries, depreciation entries, build-ups, transfers, and any prior revaluations) and reverses the net balance of each account. The resulting journal entry details are visible in the Lines section of the revaluation journal, and for multi-book environments, under Accounting > G/L Impact. These line items reflect both what was removed from the books and what was re-established and can be used to verify the net change to each account.
2. Re-establish the corrected gross asset value. NetAsset re-books the gross asset value (fixed asset account balance) based on the corrected values entered on the True Up revaluation page.
3. Re-establish the corrected accumulated depreciation. The accumulated depreciation balance is re-booked based on the corrected schedule as of the revaluation date.
4. Re-book depreciation expense from go-live through the revaluation date. For assets with a go-live entry, depreciation expense is only re-booked from the go-live date through the revaluation effective date. Depreciation prior to go-live is handled separately via the clearing account (see below). For assets with a capitalization entry, all depreciation from the in-service date through the revaluation date is re-booked.
5. Route any imbalance through a clearing account. If the net of all debits and credits in the journal does not balance, NetAsset routes the remaining difference through the clearing account specified in the True Up Clearing Account field on the revaluation page. This clearing account defaults to the fixed asset proposal clearing account associated with the asset type.

Tying Out the True Up Amounts

Because the True Up journal entry reverses and re-establishes multiple balances simultaneously, verifying the amounts requires reconstructing the corrected depreciation schedule from the beginning of the asset's life. The recommended approach is as follows:

1. Rebuild the asset's depreciation schedule manually (or in a spreadsheet) from the original in-service date using the corrected capitalized value, accumulated depreciation at in-service, useful life, in-service date, and depreciation method.
2. From that corrected schedule, identify the gross asset value and accumulated depreciation that should appear on the balance sheet as of the revaluation date. These are the values NetAsset re-establishes on the fixed asset account and accumulated depreciation account.
3. For assets with a go-live entry, sum all depreciation expense from the go-live date through the revaluation date using the corrected schedule. For assets with a capitalization entry, sum from the in-service date through the revaluation date. This amount is what NetAsset re-books to the depreciation expense account.
4. Compare each line in the True Up journal entry against the corrected schedule values. The G/L Impact tab on the revaluation journal provides the detail of what was reversed and what was re-established for each account, for each accounting book.

Go-Live Clearing Account Behavior

Assets with a go-live entry require special attention during a True Up revaluation, because the net book value posted to the go-live clearing account at go-live was based on the original (now incorrect) asset values. If the net book value at go-live also needs to be corrected, the Re-establish Go-Live Clearing Account checkbox on the revaluation page can help make that correction.

Handling Pre-Go-Live Depreciation Expense

This section applies only to assets that were brought in via a go-live transition entry. 

The True Up revaluation does not automatically re-book depreciation expense that occurred before the go-live date. That portion of the corrected schedule requires a manual entry. The process is as follows:

1. Process the True Up revaluation. If the corrected pre-go-live net book value differs from the original, check the Re-establish Go-Live Clearing Account box before submitting.
2. After the True Up is processed, identify the new go-live clearing account balance posted by the revaluation journal. This balance represents the corrected net book value of the asset at go-live (i.e., gross asset value minus accumulated depreciation prior to go-live, based on the corrected schedule).
3. Create a manual journal entry to debit the appropriate pre-go-live depreciation expense account and credit the go-live clearing account for the corrected pre-go-live accumulated depreciation amount. This clears the go-live clearing account and records the corrected historical depreciation expense.

Considerations

• The G/L Impact tab on the True Up revaluation journal is a great tool for verifying what was reversed. Each line represents the net activity of a specific account across all previously posted transactions on the asset.
• The New Gross Asset Value, New Accumulated Depreciation, and New Net Book Value fields on the True Up revaluation page display the values that will be re-established on the books. These fields update automatically as the corrected parameters (capitalized value, useful life, in-service date, and residual value) are entered.
• The True Up Clearing Account field controls the account used to absorb any remaining imbalance in the revaluation journal after all reversals and re-establishments have been applied. This defaults to the proposal clearing account from the asset type and should be reviewed and confirmed before submitting.
• If the asset has had multiple build-ups, transfers, or prior revaluations, those activities are also reversed and must be reconciled against the corrected schedule.

Limitations/Callouts

• NetAsset does not automatically re-book pre-go-live depreciation expense. This must be recorded through a manual journal entry referencing the corrected go-live clearing account balance.
• Reversing and re-establishing all prior transactions in a single journal entry can result in a large number of journal lines. This is expected behavior for a True Up revaluation.
• If the Re-establish Go-Live Clearing Account checkbox is not selected, the go-live clearing account balance is left unchanged, retaining the original (incorrect) amount. This is acceptable when only the post-go-live depreciation or asset value needs correction, but it will not reflect the corrected pre-go-live accumulated depreciation.
• Only one revaluation per asset may be processed at a time. Attempting to submit a True Up while another revaluation is in a processing status will result in an error.