Agreement Issuing the Registration and Valuation Rules of Equity

Official Gazette of the Federation: December 11, 2023

AGREEMENT Issuing the Registration and Valuation Rules of Equity

In the margin a logo, stating: National Council for Accounting Harmonization.

The National Council for Accounting Harmonization, based on articles 6, 7, 9 and 14 of the General Law of Governmental Accounting, approved the following:

AGREEMENT ISSUING THE REGISTRATION AND VALUATION RULES OF EQUITY

CONSIDERATIONS

That on December 31, 2008, the General Law of Governmental Accounting (LGCG) was published in the Official Gazette of the Federation, which aims to establish the general criteria governing Governmental Accounting and the issuance of financial information of public entities, in order to achieve their adequate harmonization to facilitate public entities the registration and oversight of assets, liabilities, income and expenses and, in general, contribute to measuring the effectiveness, economy and efficiency of public spending and income.

That Chapter II of Title Third of the LGCG indicates matters related to Patrimonial Registration, where public entities of the three levels of government are obligated to register movable and immovable property at their service in specific asset accounts; likewise, they will prepare an auxiliary register subject to inventory of the assets under their custody that, by their nature, are inalienable and imprescriptible.

The assets indicated in articles 27, paragraphs fourth, fifth and eighth; and 42, section IV of the Political Constitution of the United Mexican States will not be registered; nor those of common use indicated in article 7 of the General Law of National Assets.

Regarding the assets of common use indicated in sections VII, X, XI and XIII of article 7 of the Law in question and in accordance with the provisions of the second paragraph of article 26 of the LGCG, the investment made in them will be registered in the terms indicated in these Rules.

That derived from the above and in compliance with the provisions of articles 30 and Third Transitional, section IV of the LGCG, the National Council for Accounting Harmonization (CONAC), as the coordination body for the harmonization of governmental accounting published on December 27, 2010 the Main Rules of Registration and Valuation of Equity (General Elements); and on December 13, 2011, the Specific Rules of Registration and Valuation of Equity, so that public entities were able to register the assets that make up their equity within the timeframes indicated in said Law and under the premises and criteria established by CONAC.

That the purpose of both documents has been to provide elements for public entities to carry out the control and valuation of equity in a harmonized manner and to comply with article 3 of the LGCG, so it has been considered appropriate and necessary to incorporate into a single document the provisions issued on matters of registration and valuation of equity. Therefore, the normativity contained in said documents and the practical contributions of the public entities that make up the three levels of Government have been taken into account.

Therefore,

the National Council for Accounting Harmonization approved the following:

AGREEMENT ISSUING THE REGISTRATION AND VALUATION RULES OF EQUITY

FIRST . - The Registration and Valuation Rules of Equity referred to in article 30 of the LGCG are issued, which are integrated as follows:

INDEX

I.- Objective

II.- Scope

III.- Legal and Technical Framework

IV.- Basic Elements of Financial Statements

V.- Recognition in Financial Statements

VI.- Valuation of Assets and Liabilities

VII.- Effects of Inflation

VIII.- Changes in Accounting Estimates, Accounting Policies and Correction of Errors

IX.- Specific Criteria

1.- Archaeological, Artistic or Historic Assets

2.- Inventories and Warehouses

3.- Allowance for Doubtful Accounts

4.- Real Estate, Personal Property and Intangibles

5.- Public Works

6.- Value Added Tax (VAT) in acquisition cost

7.- Provisions

8.- Contractual Obligations

9.- Contingent Liabilities

10.- Labor Obligations

11.- Differences obtained from physical-accounting reconciliation and derecognition of assets

12.- Assets without acquisition value or surplus

I.- OBJECTIVE

Define the fundamental precepts on technical aspects for the registration and valuation of equity of public entities.

II.- SCOPE

These Rules are mandatory for public entities subject to the General Law of Governmental Accounting.

III.- LEGAL AND TECHNICAL FRAMEWORK

Legal Framework

Political Constitution of the United Mexican States

General Law of Governmental Accounting

General Law of National Assets

Federal Budget and Fiscal Responsibility Law and its Regulation

Federal Law on Monuments and Archaeological, Artistic and Historic Zones

Technical Framework

The Registration and Valuation Rules of Equity have been prepared, as applicable, in accordance with the technical criteria used in international and national best practices, among which stand out: the International Public Sector Accounting Standards published by the International Public Sector Accounting Standards Board (IPSASB, for its acronym in English) and the Financial Reporting Standards published by the Mexican Council for Financial Reporting Standards, A.C. (CINIF).

Governmental Accounting is characterized by recording the economic transactions of public entities, considering the accrual basis for the integration of budgetary and accounting information, so budgeted and authorized income and expenses annually are of great relevance in the integration of financial information and decision-making.

The governmental budget unlike the budget managed by Private Sector companies, is a fundamental tool in the measurement and control of results and becomes a mandatory mandate, therefore, in the Public Sector the budget is the functional engine of its activities, so it is considered that the amount of the budgetary exercise registered in budgetary accounting, must be the same recognized in equity accounting, in which income and expense are not necessarily a cash inflow or outflow, respectively.

Also the Conceptual Framework of Governmental Accounting and the Basic Postulates of Governmental Accounting (PBCG), both issued by CONAC, are important elements in the determination of the Registration and Valuation Rules of Equity.

Finally, the application of professional judgment is necessary, which refers to the use of technical knowledge and experience to select possible courses of action in the application of the Registration and Valuation Rules of Equity, within the context of the economic substance of the operation to be recognized.

Professional judgment must be exercised with a prudential criterion or approach, which consists of selecting the most conservative option, ensuring at all times that the decision is made on equitable bases for the users of financial information. In order to preserve the utility of financial information, it must contain explanations on the manner in which the prudential criterion has been applied, with the purpose of allowing the general user to form an adequate judgment on the facts and circumstances surrounding the operation subject to recognition.

IV.- BASIC ELEMENTS OF FINANCIAL STATEMENTS

Financial statements reflect the financial effects of transactions and other events, grouping them into categories that share common economic characteristics. These categories are called elements of financial statements. The elements are the basic components with which financial statements are prepared. These basic components provide an initial point of registration, classification and aggregation of information and economic activity in a way that complies with the objectives and qualitative characteristics of financial information, while taking into account information constraints.

This section aims to define the basic elements that make up the Statement of Financial Position and the Statement of Activities achieving uniformity of criteria in their preparation, to provide users of financial information with analysis and interpretation criteria. From these basic elements the other financial statements indicated in the LGCG are derived.

Statement of Financial Position

A. Asset

It is a resource currently controlled by the public entity as a consequence of a past event.

• Resource

A resource is an item with service potential or capacity to generate economic benefits. Physical form is not a necessary condition of a resource. The service potential or capacity to generate economic benefits may arise directly from the resource itself or from the rights to use it. Some resources represent the rights of a public entity to a variety of benefits, for example, the right to:

• Use the resource to provide services.

• Use the resources of a third party to provide services.

• Convert the resource into cash through its sale.

• Benefit from the appreciation in value of the resource.

• Receive cash flows.

Service potential is the capacity to provide services that contribute to achieving the objectives of a public entity. Service potential allows a public entity to achieve its objectives without necessarily generating cash inflows.

Economic benefits are cash inflows or a reduction of cash outflows. Cash inflows (or the reduction of cash outflows) may derive from:

• Use of an asset in the production and sale of services; or

• Direct exchange of an asset for cash or other resources.

• Currently controlled by a public entity

A public entity must have control of the resource. Control of the resource implies the capacity to use it, enjoy it or dispose of it, in such a way that it obtains the benefit of the service potential or economic benefits incorporated therein for the achievement of the provision of services or other objectives.

To evaluate if a resource is currently controlled, the public entity will assess if the following control indicators exist:

• Legal ownership.

• Possession.

• Access or capacity to deny or restrict access to the resource.

• The means to ensure that the resource is used to achieve its objectives.

• The existence of an enforceable right to the service potential or the capacity to generate economic benefits arising from the resource.

With the exception of ownership, these indicators are not conclusive factors of whether control exists, their identification and analysis may inform that decision.

• Past event

The definition of an asset requires that the resource that a public entity currently controls must have arisen from a transaction or other past event. Past transactions or other events that give rise to a public entity obtaining control of a resource and, therefore an asset, can be different. Public entities may obtain assets through their purchase in a transaction with consideration or developing them. Assets may also arise through transactions without consideration, including the exercise of sovereign power (expropriation).

B. Liability

A liability is a present obligation of a public entity that gives rise to an outflow of resources arising from a past event.

• Present obligation

A present obligation always implies the existence of a counterparty or a third party with which it has been contracted as of the date of the statement of financial position, regardless of whether their identity is known or not. The obligation is a duty or responsibility that a public entity has no practical capacity to avoid.

• An Outflow of Resources

A liability must involve an outflow of resources for its settlement. An obligation that can be settled without an outflow of resources is not a liability.

• Past event

To satisfy the definition of a liability, it is necessary that a present obligation arises as a consequence of a past transaction or other event and requires an outflow of resources from the public entity.

C. Public Treasury / Equity

Public treasury / equity corresponds to the net assets understood as the residual portion of the assets of the public entity, once all its liabilities are deducted; in other words, they are rights and investments that a public entity has less its debts; therefore, the recognition and valuation that is had of assets and liabilities will impact in the same proportion on the value of public treasury / equity.

• Equity or Capital Contributions

They are inflows of resources, paid by third parties in their capacity as owners, that establish or increase a participation in the financial situation of the public entity.

• Recovery of Capital or Invested Equity

They are outflows of resources distributed to third parties in their capacity as owners, that return or reduce a participation in the financial situation of the public entity.

Owner contributions may take the form of an initial incorporation of resources in the creation of a public entity or a subsequent injection of resources, including those taking place in the restructuring of a public entity. Distributions to owners may be: a return on investment, a total or partial return of the investment, or in the case that the public entity is in dissolution or restructuring.

Statement of Activities

The statement of activities is integrated by the following elements:

D. Income

They are increases in the net financial situation of the public entity, other than increases related to equity or capital contributions that modify the Public Treasury/Equity of the public entity.

E. Expenses

They are decreases in the net financial situation of the public entity, other than Recovery of Capital or Invested Equity that affect the Public Treasury/Equity of the public entity.

Income and expenses arise from transactions with and without consideration, such as unrealized increases and decreases in the value of assets and liabilities and in the consumption of assets through depreciation or amortization and diminution of service potential and capacity to generate economic benefits through value impairments.

F. Result of the period (savings or dissavings)

The result of the period (savings or dissavings) is the difference between income and expenses presented in the statement of activities.

V. RECOGNITION IN FINANCIAL STATEMENTS

A. Recognition criteria and their relationship with information to be disclosed.

Recognition is the process of incorporation and inclusion in the amounts exposed in the financial statements of an item that meets the following recognition criteria:

• An item satisfies the definition of an element (Asset, Liability, Public Treasury/Equity, Income and Expenses), and

• It can be measured in a way that satisfies the qualitative characteristics and takes into account information constraints.

All items that satisfy these criteria, will be recognized in the financial statements. In some circumstances, it may be specified that, to achieve the objectives of financial information, a resource or obligation that does not meet the definition of an element be recognized in the financial statements.

Recognition involves an evaluation of uncertainty related to the existence and valuation of the element. The conditions that give rise to uncertainty, if any, may change, therefore it is important that uncertainty be evaluated at each presentation date.

B. Uncertainty in valuation

To recognize an item in the financial statements, it is necessary to associate a monetary value with it. This implies choosing an appropriate valuation basis and determining if it satisfies the qualitative characteristics, taking into account information constraints, considering that it is sufficiently relevant and representative of the item to be recognized in the financial statements.

There may be uncertainty associated with the valuation of many amounts presented in the financial statements. The use of estimates is an essential part of accrual accounting (or accrual basis) taking into consideration techniques, such as the use of ranges of results and point estimates and if there is additional evidence on the economic circumstances that exist on the presentation date.

C. Information to be disclosed and its recognition

Not recognizing items that meet the definition of an element and the recognition criteria is not corrected by revealing accounting policies, notes and other detailed explanations. Information to be disclosed is appropriate when knowledge of the item is considered relevant for the evaluation of the financial situation of the public entity and, therefore, complies with the objectives of financial information.

D. Derecognition

It is the total or partial elimination of an asset or a liability recognized in the Statement of Financial Position of a public entity, which takes place when it no longer meets the definition of asset or liability.

For an asset, derecognition occurs when the public entity loses control of it and for a liability when it ceases to have a present obligation.

It is the evaluation process when changes have occurred since the previous presentation date that justify the elimination in the financial statements of an element that has been previously recognized, and the elimination of the item if these changes have taken place. To evaluate the uncertainty about the existence of an element for derecognition in accounts the same criteria as in initial valuation are used.

VI. VALUATION OF ASSETS AND LIABILITIES

Consists of selecting the valuation bases that reasonably reflect the cost of services, the operational capacity and the financial capacity of assets and liabilities, in such a way that it is useful for the public entity to be accountable and support decision-making. The fundamental basis in valuation must be the historical cost approach, which reflects more objectively the financial information of governments.

As additional considerations, attending to the attributes of an item, any input or output value may be recognized under one of the following approaches, considering the level of inflation observed in the economy:

Nominal figure: is represented by the amount determined in the historical cost or current value valuation bases.

Restated figure: is the nominal figure adjusted by a specific factor to preserve equivalent monetary units.

The factors to be used may be price indices issued by regulatory institutions (measure inflationary effects), exchange rates (measure exchange effects), etcetera.

A. Input and Output Values

Valuation bases may provide input or output values.

• Input values . - For assets, reflect the purchase cost (historical cost). Historical cost, market value (fair value) and replacement cost are input values.

For liabilities, they relate to the transaction by which an obligation is received or the amount that a public entity would accept for assuming an obligation.

• Output values. - For assets, reflect the economic benefits of the sale. An output value also reflects the amount that will be obtained from the use of the asset.

For liabilities, they reflect the amount required to fulfill an obligation or the amount required to release the public entity from an obligation.

B. Valuation Moments

• Initial valuation

On the date that an item meets the requirements for its recognition, it will be initially valued at its transaction price.

When an asset is acquired or a liability is incurred, as a result of an event that is a transaction under market conditions, the transaction price reflects the initial value on the valuation date under current market conditions.

When an asset is acquired or a liability is incurred, as a consequence of a transaction in a non-comparable market and it is not possible to determine a transaction price that reasonably presents its value, one or more current value valuation techniques may be used to determine the value of the asset or liability.

• Subsequent valuation

It is the modification of the value of an item originated by events subsequent to its initial valuation that affect it in a particular manner.

• Valuation Bases

A single valuation basis is not proposed for all transactions, events and conditions, therefore, guides are presented on the selection of a valuation basis for assets and liabilities in order to comply with the objective.

Below are listed the valuation bases that can be assigned to the assets and liabilities that the public entity has:

For Assets

• Historical cost (Input Value)

It is the consideration delivered to acquire or develop an asset, which is cash or cash equivalents, or the value of other consideration delivered at the time of its acquisition or development.

According to the historical cost model assets are initially presented at the cost incurred in their acquisition.

Subsequent to initial valuation, this cost may be assigned as expense in the form of depreciation or amortization for certain assets. After initial valuation, the valuation of an asset does not change to reflect changes in prices or increases in the value of the asset; however, the amount of the asset may be reduced through the recognition of impairments, or may be increased to reflect the cost of additions or improvements that extend the useful life of the asset.

The application of historical cost is often straightforward, because usually information about the transaction is easily available. Consequently, amounts derived from the historical cost model generally represent the cost of acquiring or developing an asset on the basis of actual transactions.

• Current value valuation

There are four current value valuation bases for assets, which reflect the dominant economic environment on the date of presentation of information:

• Market value (Input and Output Value)

It is the amount for which an asset can be exchanged, between interested and duly informed parties in a transaction carried out under conditions of mutual independence.

Market value, acquisition value and historical cost will be the same, if transaction costs are ignored and this is with consideration.

Markets for assets that are unique and traded exceptionally are not open, active and organized: any purchase and sale is negotiated individually and there may be a wide range of prices at which a transaction can be agreed. Therefore, participants will incur significant costs to buy or sell an asset. Under these circumstances, it is necessary to use an estimation technique for the selling price on the valuation date under current market conditions.

• Replacement Cost (Entry Value)

It is the most economical cost required for the public entity to substitute the service potential of an asset (including the amount it will receive for its disposal at the end of its useful life) on the presentation date.

Replacement cost differs from market value. Replacement cost reflects the substitution of service potential in the normal course of operations, and not the costs that could be incurred if an urgent need arose as a consequence of some unforeseen event.

• Net Selling Price
  (Exit Value)

It is the amount that the public entity can obtain from the sale of the asset, after deducting selling costs.

Net selling price is useful when the most efficient possible action for the public entity is to sell the asset. This is the case when the asset cannot provide service potential or the ability to generate economic benefits is at least as valuable as the net selling price.

Net selling price can provide useful information when the public entity is contractually obliged to sell an asset below market value. There may be cases where the net selling price may indicate a development opportunity.

• Value in Use (Exit Value)

It is the present value to the public entity of the remaining service potential of the asset or ability to generate economic benefits if it continues to be used and of the amount it will receive for its disposal at the end of its useful life.

In the public sector, most assets are held with the main objective of contributing to the provision of services, rather than to generate a commercial return: these assets are called "non-cash generating assets." Since value in use is usually obtained from expected cash flows, its operability in this context can be difficult.

It may be inappropriate to calculate value in use on the basis of expected cash flows, because this measure would not be faithfully representative of the value in use of this asset for the public entity. Therefore, it would be necessary to use replacement cost as a substitute for financial reporting purposes.

For Liabilities

• Historical Cost (Entry Value)

The historical cost of a liability is the consideration received for assuming an obligation, which is the cash or cash equivalents paid, or the value of other consideration received at the time of incurring the liability.

According to the historical cost model, initial measurements may be adjusted to reflect factors such as the accumulation (accrual) of interest, the addition of discount or amortization of a premium.

Historical cost is appropriate when it is probable that liabilities will be settled on the terms indicated; however, historical cost cannot be applied to liabilities that do not arise from a transaction, such as a liability to pay damages for liability or civil damages.

The advantages and disadvantages of using the historical cost basis for liabilities are similar to those applicable in relation to assets.

• Fulfillment Cost (Exit Value)

The costs that the public entity will incur to fulfill the obligations represented by the liability, assuming it is done in the least costly way.

When this cost depends on uncertain future events, all possible outcomes are taken into account in the estimated fulfillment cost.

Fulfillment cost is generally relevant for measuring liabilities, except when the public entity can obtain the cancellation of an obligation for an amount less than the fulfillment cost, then, the cancellation cost is a more relevant measure of the current burden of a liability, and in the case of liabilities assumed for consideration when the assumed price is greater than the fulfillment cost and the cancellation cost.

• Market Value
  (Entry and Exit Value)

The amount for which a liability can be cancelled, between interested and duly informed parties, in a transaction carried out under conditions of mutual independence.

This valuation basis may be appropriate, for example, when the liability is attributed to changes in a specified rate, price or index quoted on an open, active and organized market.

• Cancellation Cost (Exit Value)

Cancellation cost refers to the amount of an immediate outflow of the obligation. Cancellation cost is the amount that the creditor will accept for the settlement of their right, or that a third party would charge to accept the transfer of the liability by the debtor.

For some liabilities, particularly in the public sector, the transfer of a liability is not practically possible and the cancellation cost will, therefore, be the amount that the creditor will accept for the settlement of their right. This amount will be known if it is specified in the agreement with the creditor, for example, when a contract includes a specific cancellation clause.

VII. EFFECTS OF INFLATION

Inflation exists when there is a sustained and generalized increase in the prices of goods and services over time, not only of individual items, which results in fewer goods and services being able to be acquired today for each peso than yesterday; that is, inflation reduces the value of currency over time.

Monetary and non-monetary assets will be subject to the recognition of the effects of inflation. Within the historical value approach, recognition of the effects of inflation is necessary when there is an inflationary environment, so that the figures that serve as the basis for the initial recognition of assets and liabilities do not lose objectivity, therefore, where applicable, its update is recommended using the National Consumer Price Index (INPC).

The effect of the update of asset, liability and equity accounts (restatement) will be recorded in Item 3.1.3 Update of Public Treasury/Equity.

For its part, the state of hyperinflation is associated with the characteristics of the country's economic environment and is determined when the cumulative inflation rate during a period of three years approaches or exceeds 100%, among other economic aspects.

VIII. CHANGES IN ACCOUNTING ESTIMATES, ACCOUNTING POLICIES AND CORRECTION OF ERRORS

A. Change in accounting estimate.

It is an adjustment in the carrying amount of an asset or a liability, or in the amount of periodic consumption of an asset, which occurs after evaluating its current situation, as well as the expected future benefits and obligations associated with the corresponding assets and liabilities. Changes in accounting estimates are the result of new information or new events and consequently, are not corrections of errors.

The estimation process involves the use of professional judgments based on the most recent reliable information available.

The effect of the change in an accounting estimate will be accounted for affecting the Result of the Fiscal Year in which the change takes place, according to the nature of the operation in question; the eventual effect on future fiscal years will be recognized in the course of the same.

B. Accounting Policies

They are the principles, bases, conventions, rules and specific procedures adopted by a public entity in the preparation and presentation of its financial statements.

Changes in accounting policies are considered when changing from one accounting basis to another; a change in the recognition or valuation of an event within the application of the same accounting method, or when an asset revaluation policy is applied for the first time.

The application of different policies for past events or that have not occurred and that if they occurred were not significant do not constitute changes in accounting policies.

C. Errors

They are omissions and inaccuracies in the financial statements of a public entity in the current period or in previous fiscal years, derived from the non-application of policies, arithmetic errors or the inadvertence or misinterpretation of facts.

Changes determined in Accounting Policies and Errors will affect the Result of the Fiscal Year; likewise, changes from previous fiscal years must be recorded in Item 3.2.5 Rectifications of Results of Previous Fiscal Years.

Changes in Accounting Estimates, Accounting Policies and Correction of Errors must be explained broadly in the Notes to the Financial Statements, supporting the operations with the corresponding documentation and the authorizations of the involved instances.

IX.- SPECIFIC CRITERIA

1.- Archaeological, Artistic or Historical Goods

Archaeological monuments, artistic or historical goods or those declared as such under the terms of the Federal Law on Archaeological, Artistic and Historical Monuments and Zones, are public domain goods, inalienable and imprescriptible, which due to their characteristics are not possible to quantify, except in cases where the public entity values them on the same basis as movable and immovable goods, in accordance with what is established in the Regulation of the Law of the matter, without this affecting the differentiation referred to in fraction I of article 23 of the LGCG.

Public entities that have archaeological goods, artistic or historical goods, whether movable or immovable, under their custody, will prepare an auxiliary register subject to inventory in which a symbolic value will be assigned to the goods, in accordance with what is established in the "Guidelines for the Auxiliary Register subject to inventory of Archaeological, Artistic and Historical Goods under custody of public entities" issued by CONAC.

2.- Inventories and Warehouses

A. Physical Inventory

It is the periodic verification of the existences that public entities have and must be carried out at least once a year, preferably at the close of the fiscal year and will serve as a basis to integrate the following Books:

o

Book of inventories of raw materials, materials and supplies for production.

o

Book of warehouse of materials and supplies for consumption.

o

Book of inventories of movable and immovable goods.

The physical inventory must fully coincide with the balances of the corresponding asset accounts and their auxiliaries.

Public entities will have a period of 30 business days to include in the physical inventory the goods they acquire, likewise, they will publish the inventory of their goods through the internet, which they must update, at least, every six months.

Municipalities may resort to other means of publication, other than the internet, when this service is not available, as long as they are of public access.

When the transition from one administration to another is carried out, the goods that are not inventoried or are in the process of registration and had been received or acquired during the term of their administration, must be officially delivered to the incoming administration through a delivery and reception act, who will carry out the registration and inventory with the indicated data.

B. Warehouses

It is the place or physical space intended to deposit, guard, preserve and custody an important number of articles, pieces, tools, machineries, equipment, products or merchandise.

The acquisition value will include the purchase price, including tariffs, import expenses and other taxes (that are not recoverable), transportation, storage and other directly applicable expenses, including Value Added Tax (VAT) in those cases where it is not creditable.

In accordance with article 9, fraction III, of the LGCG, CONAC will issue guidelines for the establishment of a cost system, in which the valuation method and other elements will be defined.

3.- Allowance for Doubtful Accounts

Doubtful accounts are determined when there is an impossibility of recovery due to non-compliance by debtors once collection resources have been exhausted in time, or due to their notorious impossibility of collection.

The allowance for doubtful accounts is the affectation that a public entity makes to its results, based on experiences or studies and that allow showing, reasonably the degree of collectibility of the accounts or documents, and must be approved by the competent authority.

The procedure to effect the estimation of difficult to collect or uncollectible accounts is as follows:

a)

The public entity, according to studies or according to its experience will determine the most appropriate basis to make the monthly increases to a complementary asset account of creditor nature, affecting the results of the fiscal year in which they are generated.

b)

The public entity at the close of the fiscal year will analyze the accounts receivable and will proceed to identify and relate those with characteristics of uncollectibility for their cancellation.

The cancellation of accounts or documents receivable irrecoverable will be through the write-off in accounting records of debts charged to third parties and in favor of the public entity, once their uncollectibility is approved and in adherence to the legal and administrative provisions that apply to them, which will have the authorization of the involved instances.

4.- Real Estate, Movable and Intangible Assets

A. Real Estate and Movable

In their initial valuation these assets must be measured at their acquisition cost, market value or its equivalent in accordance with the Basic Valuation Postulate.

At later times their value will be the same original value less accumulated depreciation/amortization and/or accumulated impairment losses.

Investments in real estate and movable represent, over time, an expense for those amounts that are not susceptible to recovery. Both these assets and intangibles have the objective of generating economic or social benefits, so it is necessary that they be recognized in results in the same period in which they generate said benefits. Regardless of whether a public entity has exclusively governmental purposes, is non-profit or is for-profit, it generates some benefit.

For the real estate goods of the Federation and its public entities the cadastral value referred to in article 27 of the LGCG will be that determined by the Institute of Administration and Appraisal of National Goods (INDAABIN); and in the case of the federal entities and municipalities, it will correspond to the cadastral authority of the place where the property is located.

In the case of real estate goods, a value lower than the corresponding cadastral value may not be established, which will be transitory, while the current value of the property is determined.

B. Intangible Assets

It represents the amount of rights for the use of assets of industrial, commercial, intellectual property and others.

Like depreciation, these assets are subject to amortization, as long as they have a determinable useful life and, for their determination, the same elements as in depreciation must be considered.

In the case of intangible assets that do not have a determinable useful or economic life, they must be subject to impairment value evaluation, which must be carried out at least once a year.

If an asset includes tangible and intangible elements, for its treatment, the public entity will distribute the amount corresponding to each type of element, unless that relating to some type of element is insignificant with respect to the total value of the asset.

Subsequent disbursements after the acquisition of an intangible asset must be incorporated into the asset only when it is possible that this disbursement will allow said asset to generate future economic returns or service potential and the disbursement can be estimated and attributed directly to it.

Any other subsequent disbursement must be recognized as an expense in the result of the fiscal year.

Disbursements recognized as expenses of the fiscal year will not be recognized as part of the acquisition cost.

• Research and Development Expenses

Research is the original and planned study carried out in order to obtain new scientific or technological knowledge.

Development is the concrete application of the achievements obtained in research.

If the public entity were not able to distinguish the research phase from the development phase in an internal project, it will treat the disbursements caused by that project as if they had been borne only in the research phase.

Research expenses will be expenses of the fiscal year in which they are carried out. However, they may be capitalized as an intangible asset from the moment they meet all the following conditions:

1.

That the intangible asset will generate probable future economic returns or service potential. Among other things, the public entity can demonstrate the existence of a market for the production generated by the intangible asset or for the asset itself, or in the case that it will be used internally, the utility of the same for the public entity.

2.

The availability of adequate technical, financial or other type of resources, to complete the development and to use or sell the intangible asset.

3.

That they are specifically individualized by projects and a clearly established temporal assignment, affectation and distribution of costs is given.

Research expenses that appear in the asset must be amortized during their useful life.

Development expenses, when they meet the conditions indicated for the capitalization of research expenses, must be recognized in the asset and will be amortized during their useful life.

In the event that the conditions that justify capitalization cease to be met, the balance that remains unamortized must be taken to expenses of the period.

• Industrial and Intellectual Property

It is the amount recognized for the property or for the right to use, or to the concession of the use of the different manifestations of industrial property or intellectual property.

Capitalized development expenses will be included that, complying with legal requirements, are registered in the corresponding registry, including the registration and formalization cost.

• Computer Applications

The amount recognized for computer programs, the right to use them, or the production cost of those elaborated by the entity itself, will be included in the asset, when their use is planned in several fiscal years. Disbursements made on internally generated web pages must meet this requirement, in addition to the general requirements for asset recognition.

Likewise, the same capitalization criteria as those established for research expenses will apply.

Computer programs integrated into equipment that cannot function without it, will be treated as elements of the asset. The same applies to the operating system of a computer equipment.

In no case may maintenance expenses of the computer application appear in the asset.

C. Depreciation and Amortization

It is the systematic distribution of the acquisition cost of an asset throughout its useful life.

The amount of depreciation as amortization will be calculated considering the acquisition cost of the depreciable or amortizable asset, less its salvage value, among the years corresponding to its useful life or its economic life; recording it in the expenses of the period, with the objective of knowing the equity expense, for the service that the asset is giving, which will result in an adequate estimation of the profit in a for-profit public entity or of the operating cost in a public entity with exclusively governmental purposes or non-profit, and in a complementary asset account as accumulated depreciation or amortization, in order to be able to determine the net value or the amount remaining to depreciate or amortize.

Calculation of depreciation or amortization:

Acquisition cost of the depreciable or amortizable asset - Salvage value

Useful life

a)

Acquisition cost: It is the amount paid in cash or equivalents for an asset or service at the time of its acquisition. For the case of goods received by donations, seizures, expropriations, capitalizations, etc., the initial cost determined at their reception will be considered.

b)

Salvage value: It is the best estimate of the value that the asset will have on the date on which it will cease to be useful for the public entity. This date is that of the end of its useful life, or that of the end of its economic life and if it cannot be determined it is equal to zero. The first is the date on which the good is no longer useful, but may have a salvage value under those conditions, the second, economic life, is the date on which the asset is no longer useful to the public entity, but may come to have a useful life that generates a commercial value still to the asset.

c)

Useful life of an asset: It is the period during which the asset is expected to be used by the public entity.

To determine the useful life, the following must be taken into account, among others:

a.

The use that the public entity expects to make of the asset. The use is estimated by reference to the expected physical capacity or performance of the asset.

b.

The expected natural deterioration, which depends on operational factors such as the number of work shifts in which the good will be used, the repair and maintenance program of the entity, as well as the level of care and maintenance while the asset is not being dedicated to productive tasks.

c.

Technical obsolescence derived from changes and improvements in production, or from changes in the market demand for products or services obtained with the asset;

and

d.

Legal limits or similar restrictions on the use of the asset, such as the expiration dates of service contracts related to the good.

The competent authority that authorizes the estimated useful life of the good or group of goods must have a technical opinion, expertise obtained or study carried out that considers according to correspondence, the elements previously stated.

Exceptionally, when the elements to estimate the useful life of the asset are not available, it may

adhere to what is indicated in the Useful Life Estimation Parameters published in the Official Gazette of the Federation on August 15, 2012.

• Review of useful life

The useful life must be reviewed periodically and, if current expectations vary significantly from prior estimates, charges must be adjusted in the periods remaining of useful life.

The public entity must assess whether the useful life of the asset is defined or indefinite. An asset will be considered to have an indefinite useful life when, based on an analysis of all relevant factors, there is no foreseeable limit to the period over which the asset is expected to generate economic returns or service potential for the public entity, or to the use in the production of public goods and services.

Assets with indefinite useful life will not be depreciated, and said useful life must be reviewed each fiscal year to determine if there are facts and circumstances that allow continuing to maintain an indefinite useful life for that asset. In the event that those circumstances do not occur, the useful life will be changed from indefinite to defined, accounting for it as a change in accounting estimate.

Assets with defined useful life will be depreciated during their useful life.

• Particular cases

Land and buildings are independent assets and will be treated separately for accounting purposes, even if they have been acquired jointly. With some exceptions, such as mines, quarries and landfills, land has an unlimited life and therefore is not depreciated. Buildings have a limited life and, therefore, are depreciable assets. An increase in the value of the land on which a building sits will not affect the determination of the depreciable amount of the building.

However, if the cost of the land includes dismantling, relocation and rehabilitation costs, that portion of the land will be depreciated over the period in which economic returns or service potentials are obtained for having incurred those expenses. In some cases, the land itself may have a limited useful life, in which case it will be depreciated in a way that reflects the economic returns or service potential to be derived from it.

D. Impairment

It is a loss in the economic benefits or future service potential of an asset, additional to the recognition of depreciation or amortization. Therefore, impairment of value reflects a decrease in the utility of an asset.

The determination of the degree of impairment and, if applicable, the final destination of the good, will be carried out in accordance with the provisions and procedures applicable to the type of good (asset) in question issued by the competent authority in matters of assets, in each order of government.

• Identification of an asset that may have impaired in value

The value of an asset is impaired when its carrying amount exceeds its recoverable service amount.

A public entity will evaluate, at each reporting date, whether there is any indication of impairment of the value of its assets, if this indication exists, it will estimate the recoverable service amount of the asset.

Regardless of the existence of any indication of impairment of value, it must be checked annually whether an intangible asset with an indefinite useful life or that is not yet available for use has experienced impairment of value by comparing its carrying amount with its recoverable service amount.

When evaluating whether there is any indication that the value of an asset may have been impaired, the following shall be considered at a minimum:

External sources of information

a)

Cessation or imminent cessation, of the demand or need for the services provided by the asset;

b)

Significant long-term changes with an adverse impact on the public entity have taken place during the period, or will take place in the immediate future, referring to the technological, legal or governmental policy environment in which it operates;

Internal sources of information

c)

There is evidence of physical deterioration of the asset;

d)

If during the period significant long-term changes have taken place, or are expected to take place in the immediate future, in the scope or manner in which the asset is used or is expected to be used, which will adversely affect the public entity. These changes include the fact that the asset is idle, plans for discontinuation or restructuring of the operation to which the asset belongs, or plans to dispose of the asset before the scheduled date, and the reconsideration of the useful life of an asset as finite, instead of indefinite;

e)

A decision to stop the construction of the asset before its completion or before it is put into working condition; and

f)

There is evidence, from internal reports, indicating that the service performance of the asset is, or will be, lower than expected.

The list of indications in the previous paragraphs is illustrative and not limiting. The public entity may identify other indications that could evidence that the value of an asset may have been impaired.

The events or circumstances that may indicate the existence of impairment of value of an asset must be significant. A change in a parameter such as the demand for a service, degree or mode of use, legal or governmental policy environment will be an indication of impairment of value only if such change has been significant or has been considered to have an adverse effect in the long term.

A change in the technological environment may indicate that an asset has become obsolete and that a test of impairment of its value is required. A change in the use of an asset during the period may also be an indication of the impairment of its value.

If there is any indication of impairment of value of an asset, this could indicate that the remaining useful life, the depreciation or amortization method or the residual value of the asset, need to be reviewed and adjusted.

• Valuation of the recoverable service amount

Recoverable service amount is defined as the greater between the market value of an asset, less costs of sale and its value in use.

It is not always necessary to determine the market value of the asset less costs of sale and its value in use. If either of those amounts exceeded the carrying amount of the asset, the asset would not have suffered an impairment of its value and it would not be necessary to estimate the other amount.

• Recognition and valuation of impairment loss

The carrying amount of an asset will be reduced until it reaches its recoverable service amount if this recoverable service amount is lower than the carrying amount. This reduction is an impairment loss.

The public entity must make a formal estimate of the recoverable service amount only if there are indications of the existence of a potential impairment loss.

After the recognition of an impairment loss, depreciation or amortization charges of the asset must be subject to the corresponding adjustment, in order to distribute the revised amount of the asset in books, less its residual value (if any), in a systematic way over the period that constitutes its remaining useful life.

• Reversal of an impairment loss

A public entity will evaluate, at each reporting date, whether there is any indication that the impairment loss recognized in previous periods no longer exists or has decreased. If this indication exists the public entity will estimate the recoverable service amount of the asset in question and apply it in the fiscal year in which it is evaluated.

When evaluating whether there are indications that the impairment loss recognized in previous periods for an asset no longer exists or may have decreased, the public entity will consider, at a minimum, whether some of the following indications occur:

External sources of information

o

Resurgence of demand or need for the services provided by the asset.

o

Significant long-term changes with a favorable effect for the public entity have taken place during the period or will take place in the immediate future, referring to the technological, legal or governmental policy environment in which it operates.

Internal sources of information

o

During the period significant long-term changes with a favorable effect on the public entity have taken place or are expected to take place in the immediate future in the degree of utilization or the manner in which the asset is used or is expected to be used.

o

The decision to resume the construction of an asset that was previously stopped before its completion or putting it into working condition.

o

There is evidence, from internal reports, indicating that the service performance of the asset is, or will be, better than expected.

If there is an indication that the impairment loss recognized for an asset no longer exists or has decreased, this may indicate that the remaining useful life, the depreciation or amortization method or the residual value, also need to be reviewed and adjusted, even when the indication does not lead to the reversal of the impairment loss of the asset.

The reversal of the impairment loss recognized for the asset in previous periods must be carried out, if there has been a change in the estimates used to determine the recoverable service amount thereof, since the aforementioned loss was last recognized. If this were the case, the carrying amount of the asset will be increased to its recoverable service amount.

The increase in the carrying amount of an asset, attributable to a reversal of an impairment loss, will not exceed the carrying amount that could have been obtained (net of amortization or depreciation) had the impairment loss not been recognized for it in previous periods.

A reversal of an impairment loss on an asset will be recognized immediately in the result of the period (savings or dissavings), unless the asset is accounted for at its revalued amount.

After having recognized a reversal of the impairment loss, depreciation or amortization charges of the asset must be subject to the corresponding adjustment, in order to distribute the revised amount of the asset in books, less its eventual residual value, in a systematic way over the period that constitutes its remaining useful life.

E. Capitalization Option for Movable and Intangible Assets

Movable and intangible assets whose unit acquisition cost is less than 70 times the daily value of the Unit of Measure and Update (UMA), may be opted, based on professional judgment, to be recorded accounting-wise as an expense and will be subject to the corresponding administrative controls. The foregoing will only be applicable to acquisitions of the current fiscal year.

In the case of intangible assets whose duration or validity is less than or equal to one year, they will be given the treatment of expense of the period.

Likewise, the provisions of the Basic Postulate of Governmental Accounting called " Budgetary Registration and Integration " must be considered, which states: " The budgetary information of public entities is integrated into accounting in the same terms as presented in the Revenue Law and in the Decree of the Expenditure Budget, according to the economic nature that corresponds to it ... " , as well as the conversion matrices issued by CONAC.

In this sense, for the cases indicated in this section, the registration must be carried out according to what was budgeted and affecting the corresponding non-current asset account and subsequently they will be recorded as an expense, canceling the affected asset account.

F. Repairs, Adaptations or Improvements, Reconstructions and Catastrophe Expenses

Repairs are not capitalizable because their effect is to keep the asset in normal service conditions. Its amount must be applied to the expenses of the period.

In adaptations or improvements, the cost incurred will be capitalizable when it extends the useful life of the good, and therefore, increases its value.

Reconstructions, is a common case in buildings and certain types of machines that undergo such complete modifications that rather than adaptations or repairs they are reconstructions, which increases the value of the asset, since the service life of the reconstructed unit will be considerably greater than the remainder of the useful life initially estimated for the original unit.

Catastrophe expenses must not be capitalized, by virtue of the fact that the disbursements are to restore the original functioning of the goods.

5.- Public Works

In accordance with the Public Works and Services Related Thereto Law, public works are considered to be works that aim to build, install, expand, adapt, remodel, restore, conserve, maintain, modify and demolish real estate. That is, a public work is one that the State develops and that has a social purpose, are financed with public funds and do not have a profit purpose, but rather to provide a useful service to the community.

For purposes of the cost of the public work, the cost of the elaboration of projects, the construction itself and the supervision must be included, as well as the expenses and costs related to it, generated until its conclusion, regardless of the source of financing, observing the applicable guidelines in each case.

In accordance with article 29 of the LGCG, the registration of works in process must be carried out invariably, in a specific asset accounting account (1.2.3.5 Constructions in Process in Public Domain Assets and 1.2.3.6 Constructions in Process of Own Assets), which allows reflecting the degree of progress in an objective and verifiable manner.

In the public sector the following types of works will have to be identified for their management and accounting registration:

a)

Capitalizable public works

Capitalizable public work is that carried out by the public entity on real estate that meets the definition of an asset and that increases its value, and must have the documentary support that accredits its conclusion. Once the work in process is concluded, the balance will be transferred to the corresponding Asset account.

b)

Works on public domain assets

Public domain work is that carried out by the public entity for the construction of public work of common use.

In the case of public domain works, upon conclusion of the work, the balance of account 1.2.3.5 Constructions in Process in Public Domain Assets must be transferred to the expenses of the period when it corresponds to the budget of the same fiscal year, regarding disbursements from budgets of previous years it must be recognized in the result of previous years and must have the documentary support that accredits its conclusion.

c)

Transferable public works (donation)

These are works carried out by a public entity and delivered in favor of another.

These must remain as constructions in process until the work is concluded, at that moment, with the delivery-reception act or with the justificatory or supporting documentation as support, they must be reclassified to the corresponding non-current asset, and once its transfer is approved, the asset will be derecognized, recognizing it in expenses of the period in the case that it corresponds to the budget of the same fiscal year, regarding disbursements from budgets of previous years it must be recognized in the result of previous years.

d)

Infrastructure

These are investments made by public entities in the goods provided for in article 7 of the General Law of National Assets, which:

• Are materialized by civil engineering works or on real estate;

• Are used by the generality of citizens or destined for the provision of public services;

• Are obtained for valuable consideration or gratuitously, or constructed by the public entity;

• Are part of a system or network, and

• Have a specific purpose that does not usually admit other alternative uses.

Once the infrastructure work is concluded, its destination will be determined in accordance with subsections a), b) and c) of this numeral, carrying out the corresponding accounting registration, supported by the supporting documentation that accredits it.

Works on land owned by the Nation .

These works are part of the Assets of the public entity that carries them out and will be registered in the accounting accounts of the Chart of Accounts, attending to the items of the Classifier by Object of Expense in adherence to the Conversion Matrices, both issued by CONAC.

With the realization of these works it is not intended to give ownership of the land, since it is inalienable and imprescriptible, but it does require recognizing that it is a good that allows the public entity to fulfill its objectives, obtaining an economic benefit (when it charges for its use) or social when they can be identified, such as for example a museum in an archaeological zone or a building that a public entity builds on land that is owned by the Nation.

Said building will be held by the public entity within its assets while its useful or economic life lasts, which obliges its depreciation during that time, in order to correctly determine its operating costs.

The life of an asset is limited by its capacity to produce future benefits; therefore, when this capacity is lost partially or totally, the value of the asset must be decreased or eliminated, recognizing in the Statement of Activities an expense in the same measure or directly in the Public Treasury/Equity. When there is uncertainty regarding the derecognition of value of an asset, an estimate must be determined that recognizes that loss of value.

6.- Value Added Tax (VAT) in acquisition cost

The Value Added Tax not recoverable for public entities is part of the acquisition cost of the good, given that the Basic Postulate of Governmental Accounting " VALUATION " in the explanation establishes that the historical cost of operations corresponds to the amount disbursed for its acquisition according to the original justificatory and supporting accounting documentation.

For the case of public entities that are subject to VAT accreditation, they must subject themselves to the provisions of the Value Added Tax Law and its Regulation.

If the public entity cannot accredit the VAT, it will be registered in the corresponding heading of the expense or asset that is acquired.

In addition, in section VI. Valuation of Assets and Liabilities it is established that in the determination of the acquisition cost any other costs incurred, associated directly and indirectly to the acquisition, must be considered, which are presented as accumulated costs.

In accordance with International Public Sector Accounting Standards 17- Property, Plant and Equipment and NIF C-6, Property, Plant and Equipment of the Financial Information Standards that determine that the cost of elements of property, plant and equipment comprises its acquisition price, including import tariffs and non-recoverable indirect taxes (An indirect tax is VAT) that fall on the acquisition, after deducting any discount or price reduction.

7.- Provisions

Represents the amount of obligations charged to the public entity, originating in certain circumstances, whose exact value depends on a future event; these obligations must be justifiable and their monetary valuation must be reliable.

All event from which arises a payment obligation, of a legal, contractual or implicit type for the public entity, will give rise to the liability, in such a way that the public entity has no other more realistic alternative than to satisfy the corresponding amount. Obligations from notifications of a legal nature derived from litigation must be recognized when they are formally communicated and virtually unavoidable.

An implicit obligation is one that derives from the actions of the public entity itself, in which:

o

Due to an established pattern of behavior in the past, to governmental policies that are public domain or to a statement made in a sufficiently concrete manner, the public entity has manifested to third parties that it is willing to accept certain types of responsibilities; and

o

As a consequence of the foregoing, the public entity has created a valid expectation, before those third parties with whom it must comply with its commitments or responsibilities.

Recognition

A provision must be recognized when all of the following conditions are met:

o

There is a present obligation (legal or assumed) resulting from a past event charged to the public entity.

o

It is probable that an outflow of economic resources will occur as a means to settle said obligation.

o

The obligation can be reasonably estimated.

For the foregoing purposes, the following must be taken into account:

o

Only those obligations arising from past events, whose existence is independent of the future actions of the public entity, will be recognized as provisions.

o

Provisions cannot be recognized for expenses that it is necessary to incur to function in the future.

o

An event that has not given rise to the immediate birth of an obligation, may do so at a later date, due to legal changes or actions of the public entity. For these purposes, legal changes are also considered those in which the regulations have been approved, but have not yet entered into force.

o

The outflow of resources will be considered probable whenever there is a greater possibility that it will occur than otherwise, that is, that the probability that an event occurs is greater than the probability that it does not occur.

Initial recognition

The amount recognized as a provision must be the best estimate of the disbursement necessary to cancel the present obligation or to transfer it to a third party.

For its quantification the following issues must be taken into account:

a.

The basis of the estimates of each of the possible outcomes, as well as their financial effect, will be determined in accordance with:

o

The criterion of the administration of the public entity.

o

The experience that is had in similar operations, and

o

Expert reports.

b.

The amount of the provision must be the present value of the disbursements that are expected to be necessary to cancel the obligation. When it comes to provisions with maturity less than or equal to one year and the financial effect is not significant it will not be necessary to carry out any type of estimate.

c.

Reimbursement by third parties: In the event that the public entity has ensured that a part or all of the disbursement necessary to settle the provision will be reimbursed to it by

a third party, such reimbursement shall be recognized as an independent asset, whose

amount must not exceed the amount recorded in the provision. Likewise, the expense related to the

provision must be presented as an independent item of the income

recognized as reimbursement. Where applicable, it shall be disclosed in notes regarding

those items that are related and that serve to better understand an operation.

Subsequent Recognition

Provisions must be reviewed and adjusted where applicable, at least at the close of each fiscal year,

to reflect the best estimate existing at that time. When it is no longer probable that the outflow of resources

incorporating economic benefits or potential services will occur, to cancel the corresponding obligation

, the provision shall be reversed, whose counterpart shall be an income account of the

fiscal year.

8.- Contractual Obligations

They represent agreements made to carry out certain actions in the future, which do not

meet the requirements to be considered as liabilities or provisions.

Disclosure in the notes to the Financial Statements must consider the amount and nature of the

commitments due to their relevance, mainly:

-

When they represent significant additions to fixed assets.

-

When the amount of contracted services or goods substantially exceeds the immediate needs

of the public entity or what is considered normal within the rhythm of the operations

of the same public entity.

9.- Contingent Liabilities

Contingent liabilities consider:

-

Obligations arising from past events, whose existence has to be confirmed only by the

occurrence of one or more uncertain future events that are not entirely under the control of the

public entity.

-

A present obligation arising from past events, which has not been recognized accounting-wise because

it is not viable that the public entity will have to settle it, or because the amount of the obligation cannot

be quantified with sufficient reliability.

10.- Labor Obligations

A public entity must recognize a liability or an estimate for employee benefits if all

of the following criteria are met:

-

There is a present obligation, legal or assumed, to make payments for employee benefits, in

the future, as a consequence of events occurring in the past;

-

The obligation of the public entity with the employees is attributable to services already rendered and, therefore,

said rights are accrued;

-

Payment of benefits is probable; and

-

The amount of the benefits can be quantified reliably.

• Basic concepts of labor obligations

-

Employee benefits: Are those granted to personnel that include all kinds of

remunerations that accrue in favor of the employee and/or their beneficiaries in exchange for the

services received from the employee. These remunerations are classified into: short and

long-term direct benefits, termination benefits and retirement benefits.

-

Short and long-term direct benefits: Are remunerations that are paid regularly to the

employee during their employment relationship; such as wages, salaries, overtime, piecework,

commissions, bonuses, annual gratuities, vacations and premiums thereon. If they are

payable within the twelve months following the close of the period they are short-term; if they are after

twelve months, they are long-term.

Long-term direct benefits include, among others, the following remunerations:

compensated absences long-term (such as, sabbatical years, scholarships or prolonged studies

normally abroad or special vacations after long periods of active life); bonuses or

seniority incentives and other long-service benefits, temporary or permanent disability benefits, deferred benefits that will be paid to employees starting from the twelve

months following the close of the period in which they have been earned.

-

Termination benefits: Are remunerations that are paid to the employee or to their beneficiaries at

the end of the employment relationship before having reached their retirement age (for example: legal compensation for dismissal, bonuses or special compensations offered in exchange for voluntary

resignation, seniority premium for causes of death, disability, dismissal and voluntary separation before the retirement date or substitute retirement, additional gratuities

and medical services), in accordance with the law and the terms of the benefits plan.

-

Retirement benefits: Are remunerations that are paid to the employee and/or their beneficiaries, upon reaching

said employee their retirement age or subsequent to this and, in some cases prior to

this, if they reach their eligibility condition, derived from the future benefits offered by the public entity in exchange for the current services of the employee. Retirement benefit plans can be for: pensions, seniority premium and compensation, either by retirement or by substitute retirement

of retirement, and other retirement benefits.

11. Differences obtained from the Accounting Physical Reconciliation and the Derecognition of Assets

Differences

The value differences that are obtained as a result of the physical-accounting reconciliation of movable assets,

real estate and intangibles of public entities, shall be recognized affecting the accounts

corresponding to item 3.2.3 Revaluations and to the account of the group Non-Current Asset corresponding.

Derecognition of Assets

In the case of derecognition of assets due to loss, misplacement, theft or accident and not located, among others, this

shall be recorded by crediting the Non-current Asset account that is affected and charging account 5.5.1.8

Decrease of Assets due to Loss or Obsolescence. The above regardless of the compliance with the

legal-administrative procedures that must be carried out before the Internal Control Bodies or

corresponding instances in accordance with applicable regulations.

12.- Assets without acquisition value or surplus.

In case the acquisition value of an asset is not known, it may be assigned, for accounting registration purposes by the area designated by the competent authority of the public entity, considering the value of

other assets with similar characteristics or, failing that, the one obtained through other mechanisms

deemed pertinent.

SECOND. - In accordance with articles 1 and 7 of the LGCG, the Federal and

Federative Entities governments shall adopt and implement the decisions of CONAC, via the adaptation of their

legal frameworks, which could consist in the eventual modification or formulation of laws or administrative provisions

of a local nature, as the case may be.

THIRD. - In accordance with the provisions of article 1, third paragraph of the LGCG, the governments of the

Federative Entities shall coordinate with municipal governments so that they manage to have a

harmonized accounting framework, through the exchange of information and experiences between both orders

of government.

TRANSITORY ARTICLES

FIRST . This Agreement shall enter into force the day following its publication in the Official Gazette of the

Federation and its application shall be mandatory starting from January 1st, 2025.

SECOND . Starting from the mandatory application of this Agreement, the

Main

Rules for Registration and Valuation of Equity (General Elements) published in the Official Gazette of the

Federation on December 27, 2010, as well as the Specific Rules for Registration and Valuation of Equity, published on December 13, 2011 and their respective modifications, shall become void.

THIRD. The provisions in the previous transitory article do not affect the validity of the Useful Life Estimation Parameters published in the Official Gazette of the Federation on August 15, 2012, so these may

be applied exceptionally in the terms indicated therein, when it is not possible

to estimate the useful life, to which reference is made in numeral 4 of the Specific Criteria, section C, subsection

c) of these Rules

FOURTH. The Federative Entities, in compliance with the provisions of article 7, second paragraph,

of the LGCG, shall publish this Agreement, in their official written and electronic dissemination media,

within a period of 30 business days following the publication of this one in the Official Gazette of the

Federation.

FIFTH. In terms of article 15 of the LGCG, the Technical Secretary shall keep a record on an Internet

page of the acts that the public entities of the federative entities, municipalities and territorial demarcations

of Mexico City carry out to adopt the decisions of the Council. For such effects, the

Accounting Harmonization Councils of the Federative Entities shall remit to the Technical Secretariat the

information related to said acts to the electronic address conac_sriotecnico@hacienda.gob.mx,

within a period of 15 business days counted from the conclusion of the period fixed in the transitory

previous article.

In Mexico City, being twelve hours of the day November 27 of the year two thousand twenty-three, with

foundation in articles 11 of the General Law on Government Accounting, 8 section IV and 23 section

IX of the Internal Regulations of the Ministry of Finance and Public Credit, the Head of the Unit

of Government Accounting of the Undersecretariat of Expenditures of the Ministry of Finance and Public Credit, in my capacity as Technical Secretary of the National Council for Accounting Harmonization, I HEREBY STATE AND

CERTIFY that the document consisting of 24 useful sheets, initialed and verified, corresponds with the text

of the AGREEMENT BY WHICH THE REGISTRATION AND VALUATION RULES FOR EQUITY ARE ISSUED,

approved by the National Council for Accounting Harmonization, same that was available to the members

of said Council in its third session held, in second call, on November 21 of the present

year, situation which is certified for the corresponding legal effects. The Technical Secretary of the Council

National for Accounting Harmonization, L.C.P. Juan Torres García .- Initials.

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