Discover the optimal fixed asset configuration in Microsoft Dynamics 365 Finance to ensure accurate depreciation for financial reporting and tax compliance. Learn how to leverage primary and derived books effectively.
Table of Contents
Question
A multinational corporation is restructuring its fixed assets management process. The goal is to improve financial reporting accuracy and compliance with varying tax regulations across different regions. You need to evaluate the existing fixed asset configuration and recommend changes to ensure that depreciation is calculated correctly for both financial reporting and tax purposes, considering the use of primary and derived books. What configuration should you recommend?
A. Configure all books to use the same depreciation method to simplify the management process and ensure consistency in reporting.
B. Eliminate the use of derived books and manage tax reporting through manual journal entries to reduce system complexity.
C. Set up primary books for financial reporting with the straight-line depreciation method and derived books for tax purposes using the appropriate reducing balance method.
D. Use manual depreciation for all books to allow for flexible adjustments based on the financial or tax reporting requirements.
Answer
C. Set up primary books for financial reporting with the straight-line depreciation method and derived books for tax purposes using the appropriate reducing balance method.
Explanation
Setting up primary books with a straight-line depreciation method is typically used for corporate financial reporting due to its consistency and simplicity. Derived books with reducing balance methods are often used for tax purposes to maximize depreciation expenses early in the asset’s life. Configuring all books with the same method (option B) would not address the different objectives of financial and tax reporting. Manual depreciation (option C) is not efficient for a multinational corporation with many assets. Eliminating derived books (option D) would increase the risk of errors and reduce efficiency in managing tax reporting.
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