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What is NIF C-6 about?
NIF C-6 is a financial regulation that addresses the comprehensive and financial accounting of concepts related to properties, Plant and equipment, defining the depreciation of components or fixed assets, it is essential for a company to have detailed knowledge of the state of its fixed assets, including the most significant components, their original historical value, their net book value and the associated depreciation.
The NIF C-6 addresses various aspects, such as presentation, valuation and disclosure, following general standards that include accounting treatment, initial cost, exchange of activities, as well as aspects related to write-offs, depreciation and impairment of assets, compliance with this standard It is linked to the cost method, which assigns an appropriate useful life to assets and determines their remaining useful life, thus allowing for depreciation of the assets and establishing a residual value.
Where can we apply NIF C-6?
In accordance with the guidelines established by this financial regulation, the main assets that must be taken into account are those that are part of a cash generating unit (CGU), these assets, throughout their useful life, generate economic benefits, whether through a manufacturing process, a production line or by providing a service that results in economic returns.
This analysis is carried out with the purpose of identifying the components of the assets belonging to the category of property, plant and equipment, The objective is to carry out a depreciation analysis that covers the estimation of the economic useful life and the residual value of the assets, all in accordance with the guidelines established in the regulations.
What is residual value?
Residual value, in the financial and accounting context, represents the estimated value of an asset at the end of its useful life or at the end of its service period and refers to the value that an asset is expected to retain after it has been fully depreciated. or out of stock, This concept is crucial in accounting for property, plant and equipment, as it helps determine the amount that an asset can contribute in generating economic income even after being used for a specific period., calculating residual value is essential to accurately assess the depreciation of an asset and to make long-term financial projections.
A properly estimated residual value provides companies with a more complete understanding of the economic useful life of their assets and contributes to more informed financial management.
What can we analyze with Standard C-6?
The purpose of the standard NIF C-6 is to identify the fundamental components of an asset, which could be a Cash Generating Unit (CGU), in order to analyze them in terms of:
Acquisition cost: Amount or sum disbursed when making the investment.
Replacement cost: During normal operation, it is the lowest cost at which the service of a similar asset can be altered.
Component: This is a fraction or portion that is represented or constitutes a part of the plant and equipment, but is differentiated from the rest of the category.
Depreciation: Its purpose is to systematically and logically allocate the purchase expense of a component or fixed asset, subtracting its residual value, throughout the estimated useful life of said component.
Depreciable amount: It refers to the portion that, after calculating and distributing the acquisition cost related to the asset (discounting its residual value), must be systematically allocated to results throughout the useful life of the asset.
Recoverable amount: It is the highest economic value that can be derived from an asset in optimal conditions; This figure covers the higher amount between the value in use and the net sale price of the asset.
Loss due to impairment: This is an excess over the recoverable value of a component in the net book value.
Net sales price: Also known as net realizable value, this amount represents the amount that would be obtained, either in kind or in cash, through the sale or exchange of an asset.
Residual value: Upon reaching the end of its useful life, a component may generate an amount for its disposal, known as its residual value.
Use value: In the context of future cash flows, which arise both from the continued use of assets and from their disposal at the end of their useful lives, it is possible to calculate value in use.
Net book value: After subtracting accumulated depreciation and impairment losses, the acquisition cost of a component is recognized.
Fair value: In a freely competitive market, it refers to the amount of cash or equivalents that participants would be willing to exchange in a transaction of purchase or sale of an asset; this applies to operations between parties that are willing, informed and interested.
What depreciation methods can be used in Standard C-6?
When evaluating the component or fixed asset, it is necessary to select the most appropriate depreciation method, taking into account the activity and the way in which economic benefits will be obtained. This choice will allow the income to be effectively addressed, also considering the associated costs and expenses. properly.
Activity methods:
Name that describes the asset and specific characteristics of each element.
Cost center
Declining charge methods:
Digit Number Addition Method
Declining Balance Method
Special depreciation methods:
Group and Composite Methods
Hybrid or Combination Methods
