Reconciliation doesn't evaluate the CI state value. It looks for related sw installation records. So, to answer your question, all CI's with sw installations will be included in Reconciliation Results.
There is a business rule that executes when a CI is set to Lost/Stolen or Retired that kicks off sw installation record deletion for that specific CI. In this case a lost/stolen or retired CI will not be considered, but only if the installations are deleted. If the business rule has been disabled, then the installations will remain linked to the CI causing it to be included in reconciliation regardless.
If you have a reason to keep the sw installation records for a CI that is truly retired, then you'll want to use the com.snc.samp.exclude_device_flag system property to definitively identify those CI's, and possibly others to exclude from reconciliation. The system property can be found in Software Asset->Administration->Properties and it looks like the below screenshot. The input expects a custom field name for a new true/false field you will use to identify CI's to exclude. A yes value excludes that CI.
The reason the application behaves this way is because an organization is responsible for any CI with software installed except under specific situations called out in a license's terms and conditions. If a device is considered lost, stolen, or retired and then appears on the network and sw installations are recreated, then both SAM Admins and Security teams should be reviewing why the device reappeared. And, that software must be accounted for in license consumption.
