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The valuation of assets and liabilities in an acquisition can make the difference between a strategic investment and a financial risk. In this context, Financial Reporting Standard NIF B-17, in force since 2016, establishes the bases for the determination of fair value in business purchasing processes, strengthening the transparency, comparability, and quality of financial information.
What does NIF B-17 regulate?
NIF B-17 provides a regulatory framework for valuing assets and liabilities acquired in a business combinationThis means that not only the price paid by the company is taken into account, but also the true economic value of the acquisition, based on its ability to generate future cash flows.
The standard distinguishes between:
- The purchase of a business in operation (active, organized and generating returns),
- And the acquisition of a set of assets that does not qualify as a business.
What is fair value?
He fair value It is the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants, at the valuation date and under current conditions.
This concept seeks to more accurately reflect the economic value of the acquired items, considering the real market value rather than historical accounting values.
Application of fair value
NIF B-17 establishes that all identifiable assets and liabilities in an acquisition must be recognized at their fair value on the date of purchase. This applies to both tangible assets such as machinery and real estate, as well as intangible assets such as trademarks, software, patents, and goodwill.
How is it calculated?
- The estimated future income streams that the assets can generate.
- They are used financial valuation techniques, such as discounted cash flow.
- They are considered provisions and risks, such as labor liabilities or relevant contractual commitments.
Key aspects considered by NIF B-17
| Key Aspect | Description |
|---|---|
| Intangible Assets | They are valued based on their ability to generate future economic benefits, using techniques such as discounted cash flows or market comparables. |
| Associated liabilities | They include labor, contractual, and other obligations. Not all environmental liabilities are explicitly included in the standard. |
| replacement cost | It applies to tangible assets such as machinery or real estate, estimating their value based on the cost of acquiring an asset with similar capabilities, without exceeding their recoverable value. |
| Market assumptions | Fair value should be based on objective market conditions, without considering the buyer's specific intentions or plans for use. |
Main benefits of applying NIF B-17
1. Financial transparency
One of the most important contributions of NIF B-17 is that it standardizes the way in which fair value is determined in an acquisition. By establishing clear and uniform criteria, the excessive subjectivity that previously existed in the valuation of assets and liabilities is eliminated. This generates greater trust among investors, auditors and stakeholders, since financial reports reflect the economic reality of the transaction, and not just the perspective of the buyer or seller.
Furthermore, the transparency offered by the standard allows more consistent comparisons between companies within the same sector or between similar operations, which is essential in globalized markets where trust and traceability are key assets.
2. Greater accuracy in reports
LThe application of fair value allows the acquired assets and liabilities to be reflected at their real economic value at the time of the transaction, not at its historical cost or an arbitrary estimate. This translates into more accurate, current, and useful financial reports for decision-making.
For example, when acquiring a company with a well-established brand, traditional accounting recognition may not reflect the true value of that brand. NIF B-17 allows for the quantification and reporting of that value as part of the intangible asset, aligning reporting with the market reality and the value-generating capacity of the business.
3. Adequate recognition of intangibles
In today's economy, intangible assets such as Brands, software, licenses, customer relations and know-how can represent a significant part of the total value of a company. NIF B-17 recognizes this reality by requiring the Identification and individualized valuation of acquired intangible assets, provided they can be measured reliably.
This prevents all the extra value paid for an acquisition from being recorded as goodwill, allowing for a more detailed and strategic analysis of the value of each component of the business. Likewise, strengthens the role of intellectual capital in investment planning and evaluation.
4. Comprehensive risk assessment
The rule requires considering provisions for future events that may generate costs for the acquirer, such as pending litigation, labor, environmental, or contractual liabilities. This allows companies anticipate real financial impacts arising from an acquisition, protecting both buyers and shareholders from ill-founded decisions.
Including these risks in the valuation offers a more complete view of the operation, promoting a proactive and responsible risk management, key to long-term financial and operational sustainability.
5. Strategic approach
Finally, NIF B-17 turns the valuation of an acquisition into a tool strategicBy focusing on fair value and future cash flows, the standard guides companies to think about long-term performance and in the real return on investment.
This helps management and financial teams to:
- Identify key sources of value within the acquired business.
- Detect underutilized assets or hidden risks.
- Optimize post-acquisition integration based on solid data.
In short, it allows you to make investment decisions with a more technical, objective and market-aligned basis, strengthening the strategic vision of the business and its projection into the future.
