1. Localizations for Colombia Implementation Guide
  2. Understanding Depreciation Adjustments for Inflation

Understanding Depreciation Adjustments for Inflation

Inflation can have a significant effect on the value of an organization's assets. For accurate financial reporting and income tax, Colombian companies apply annual inflation adjustments to revalue all fixed assets. Inflation adjustments affect the calculation of depreciation and amortization and can result in an increase or decrease of taxable income. You use the asset's adjusted balances to calculate depreciation.

Run the Adjustment by Inflation Depreciation/Amortization report (R76C1202) to calculate the depreciation inflation adjustments for the organization. The report lists detailed and summary information for each asset, including:

  • Adjustment percentage for the affected year. (Porcentaje de Ajuste Año Gravable [PAAG])

  • Period.

  • Values.

  • Monthly inflation adjustment calculation.

First, you should run the report in proof mode. Carefully review the detailed and summary information for accuracy, and correct any errors, before you run the report in final mode. After you run the report in final mode, post the journal entry that the system generates.