Prior Year and Prior Period Adjustments

Adjustments can be made to previously closed periods in the current fiscal year and periods in the prior fiscal year.  These adjustments may be required to reflect audit adjustments for the prior fiscal year, or to correct estimated entries made to financial and statistical accounts when actual values become available after the final close for a period.  Prior year and prior period entries allow adjustments to be reflected in the fiscal period in which the entries originally should have been processed.

Adjustment journals are meant to be used on a one-time or non-recurring basis.  Adjustments are not meant to be used in place of standard accrual entries.  If a situation arises where adjustment journals are used on a monthly basis to correct closing entries, consideration must be given to extending the period-end closing period so that reasonable closing entries can be made; or to implementing procedures that will provide better estimating for closing entries.

Adjustment journals are entered in the Adjustment Journal Validation Program (GL050E), and posted to the General Ledger by the Adjustment Journal Post Program (GL230P).  Adjustment entries for all locations are processed during the post run.  The post program automatically rolls forward from the adjustment period up to the current fiscal period the effect of adjustment entries for balance forward, prior year end, and year-to-date activity fields.

The change to year-to-date retained earnings caused by adjustment entries is automatically posted.  The effect on the year-to-date retained earnings of prior year adjustments is automatically rolled forward to the last period in the fiscal year.  In the first period of the next fiscal year, the system automatically posts the adjustment to the year-to-date retained earnings account to the inception-to-date retained earnings equity account.  The retained earnings Reference File record (category 124) is used to identify the year-to-date retained earnings and inception-to-date retained earnings accounts for each location.  This Reference File record must exist for a location before prior year adjustments can be processed for the location.

Adjustments made to accounts that are used in the calculation process or in the distribution of allocated amounts must be carefully reviewed.  The effect of the adjustment must manually be made to allocation distribution accounts.  Allocations CANNOT be rerun for prior periods based on adjusted account balances.

Adjustments made to accruals or other journals that are normally reversed out in the period after they are posted must also be carefully reviewed.  The adjustment journal will be processing in the specified fiscal period.  The reversal amount must be entered as another adjustment journal in the fiscal period after the original adjustment was processed.

Financial statements and responsibility reports can be printed for periods for which adjustments were processed by specifying the fiscal period and year on the report request select screen.  Account analysis reports CANNOT be requested for adjusted periods without making report specification changes to access the correct prior year or prior period amount values.  If financial statement and responsibility reports are to be printed using prior year budget values, the reporting budget year and sequence must be specified on the report request.

Related

• Management Reporting