NIF C-6 – Property, Plant and Equipment

International financial standard NIF C-6

The NIF C-6 It is a financial standard that deals with the concepts of property, plant and equipment in terms of their comprehensive accounting and financial treatment and determines the depreciation of the components or fixed assets.

For a company it is important to know the status of fixed assets and their most representative components, their original historical value, their net book value and depreciation.

In the NIF C-6 Aspects such as presentation, valuation and disclosure are specified and general standards are taken into account, including accounting treatment, initial cost, exchange of activities and aspects that refer to disposals, depreciation and deterioration of assets.  

Linked to compliance with this standard is the cost method in which assets are assigned an adequate useful life and their remaining useful life, in this way the assets can be depreciated and a residual value will be obtained. 


What does NIF C-6 apply to? 

Following the guidelines stipulated by this financial standard, the main assets to be considered are those that make up a cash generating unit (CGU). which, throughout their useful life, generate an economic benefit (cash flow) through a manufacturing process or production line or, where appropriate, by performing a service that generates economic returns.

This study is carried out for the identification by components of the assets belonging to the heading of property, plant and equipment, with the purpose of analyzing their depreciation that involves the estimation of the economic useful life and the residual value of the assets, all under the guidelines established in the standard.

What is analyzed in the NIF C-6 standard?

The objective of the NIF C-6 standard is to locate the main components of an asset, which could well be a Cash Generating Unit (CGU), to analyze them insofar as:

Acquisition cost Value or amount that was paid at the time of making the investment.
replacement costIn the course of normal operation it is the least cost at which the service of a similar asset can be changed.
ComponentIt is a part or portion that is represented or is part of the plant and equipment, however it is different from the rest of the item.
DepreciationIts objective is to systematically and reasonably allocate the acquisition cost of a component or fixed asset, less its residual value, over the estimated useful life of said component.
depreciable amountIt is the part that, once the acquisition cost corresponding to the asset has been determined and distributed (less its residual value), must be assigned to results, systematically, throughout its useful life.
recoverable amountIt is the maximum economic value that can be obtained from an asset, if it is in good condition, this amount includes the greater amount between the value in use and its net sale price.
impairment lossIt is an amount in excess of the recoverable amount of a component within the net book value.
net sale priceAlso called net realizable value, this price is the price that would be received, in kind or in cash, for a sale or exchange of an asset.
Residual valueWhen a component is at the end of its useful life, an amount can be obtained for its disposal, which is known as residual value.
use valueWithin the future cash flows, due to the continuous use of the assets and disposal at the end of their useful life, the value in use can be determined.
Net book valueOnce the accumulated depreciation and impairment losses have been deducted, the acquisition cost of a component is recognized.
fair valueWithin the free competition market, it is the amount of cash or cash equivalents that participants would be willing to exchange for the purchase or sale of an asset in an operation between parties that are willing, informed and interested.
INFOGRAPHIC NIF C 6 part 2 1066x1536 1

Depreciation methods according to NIF C-6

Considering the component or fixed asset, depending on the activity and the way in which benefits will be obtained in economic matters, the best depreciation method to be applied must be chosen, in this way it will be possible to adequately face the income and the corresponding costs and expenses will be taken into account.  

The accounting standard mentions the following methods:

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

Diagram of Services to carry out NIF C-6


Component Analysis Methodology


Main points to develop for compliance with NIF C-6

Initial recognition: Determine the acquisition cost of all fixed assets.

  • Identification of components by means of a fixed asset control

Subsequent recognition: Determination of depreciation applicable to the asset, as well as impairment losses (C-15), to determine your net worth.

  • Determination of useful lives for each component
  • Analysis and determination of depreciation
  • Impairment losses (C-15).
  • Determine your net book value.

For the identification of the assets by components, ANEPSA develops a Fixed Asset Control study whose purpose will be to establish the recognition of the elements of property, plant and equipment, as well as the measurement of their cost at the time of their recognition. In 3 stages:

  • Physical Inventory and Plaqueo.
  • Analysis and determination of depreciation
  • Integration and adequacy Physical accounting.
  • Physical accounting reconciliation.

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