Depends on when you cancel. If you cancel 31 or more days before arrival, points go back into your account as they were when you made the reservation -- current use year points go back in as curent use year AKV points, borrowed as borrowed, and banked as banked.
If you cancel 30 days or less from date of arrival, all points are put into a holding account and are deemed "holding account points." Though you can use them for any resort, you can use them only for a reservation made 60 days or less before date of arrival and they must be used by the end of the use year you are in at time of cancellation.