COMPARATIVE EFFECTS OF HISTORICAL COST ACCOUNTING AND FAIR VALUE ACCOUNTING ON EARNINGS PERFORMANCE OF QUOTED FIRMS IN NIGERIA

Abstract

The work examined the comparative effects of historical cost accounting and fair value accounting measurement bases on earnings performance of 10 listed manufacturing firms in Nigeria, between the periods 2009-2020.The choice of the manufacturing sector was pertinent as the manufacturing industries are considered vital to economic growth and development. The study adopted the ex-post facto research design, with data collected from published financial statements of 10 manufacturing firms quoted on the Nigerian Exchange Group Ltd. A cross sectional analysis of the financial reports of the 10 manufacturing firms was carried out between eras 2009 - 2012(HCA) and 2013 – 2020(FVA). The regression results revealed that depreciation, dividend and taxation under fair value accounting (FVA) have more positive and significant effect on ROA (earnings performance) than depreciation, dividend and taxation under historical cost accounting (HCA). The work concludes that fair value measurement choice has superior effect on bottom lines of manufacturing firms than the historical cost measurement choice. The empirical findings imply or provide strong support for the proposition that fair value measurement choice has superior effect on bottom lines of manufacturing firms than the historical cost measurement choice. It was recommended amongst others that: Accounting bodies in Nigeria should organize enlightenment workshops for practicing accountants and managers of firms to create awareness of current cost accounting and the need to deviate from the historical cost accounting method during inflationary period.