The correct financial management of an entity is based on the adequate measurement and valuation of its assets and liabilities.

In this context, the cost It is defined as the value of the resources that an entity delivers or promises to deliver in exchange for goods or services, with the purpose of generating income. When these costs have the potential to produce income in the future, they are considered assets.

The Basic Valuation Postulate

Within the framework of the Financial Information Standards (NIF) in Mexico, the valuation It is a fundamental basic postulate. This principle establishes that assets and liabilities must be valued so that they accurately and reliably reflect their economic characteristics and the nature of the transactions that give rise to them. The proper application of valuation allows users of financial statements to make informed decisions based on the economic reality of the entity.

NIF A-1 establishes the historical cost and current value as valuation bases, which we will analyze in this article.

Historical Cost

Historical cost is the original acquisition value of an asset. This accounting approach is divided into two main categories:

1. Acquisition Cost: Refers to the amount paid to obtain an asset, including its purchase, construction or manufacturing.
2. Amortized Cost: This type of cost is especially applicable to financial assets and liabilities. It reflects the present value of future cash flows, adjusting over time to include changes such as accrued interest and impairment.

Current Value

Current value is established using updated information that reflects economic conditions at the valuation date. This concept is divided into several categories:

• Fair Value: It represents the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between knowledgeable parties.
• Entity Specific Value: This value refers to the estimated amount that can be recovered from an asset or paid when settling a liability, and is subdivided into:
  • Use Value: It refers to the present value of the future cash flows that an entity expects to obtain from an asset during its useful life.
  • Net realizable value: It is the estimated amount expected to be received from the sale of an asset, reducing disposal costs.
  • Compliance Value: It is the present value of the cash flows expected to be transferred to settle a liability.
• Value by Equity Method: This is the acquisition cost of a permanent investment, adjusted for the investor's share of changes in the net assets of the entity in which it invests.

Conclusion

Understanding and correctly applying the cost and valuation of assets and liabilities are essential for effective financial management. Valuation, as a basic postulate according to the NIF, ensures that the financial information provided is relevant and reliable. This not only allows entities to optimize their resource decisions, but also promotes transparency and trust among investors and other stakeholders. Thus, the regulation establishes a framework that facilitates a faithful representation of the financial situation of entities in the market.

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