IIARD International Institute of Academic Research and Development

Journal of Accounting and Financial Management (JAFM )

E-ISSN 2504-8856
P-ISSN 2695-2211
VOL. 8 NO. 4 2022
DOI: https://www.doi.org/10.56201/jafm.v8.no4.2022.pg1.5

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A Review of Accounting for Inflation and Current Price Financial Reporting of Manufacturing Firms in Nigeria

Question Christiana

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Abstract

Inflation is the most common fact of our time, the single greatest peril to our economic health. Prices of various goods and services have been rising at a very high rate. In the past few years companies have reported very high profits on the one hand but on the other hand, they have faced real financial difficulties. This is so because in reality dividends and taxes have been paid out of capital due to overstated figures of profits arrived at by adopting historical cost concept. This has led to the collapse of many businesses. Money is a measure of value and value changes from time to time so money is a function of value change. The value of a business is its earnings per share (share price). Changing value of' money has resulted in a chaos and distortion while reporting results of economic activities of business enterprises in the manufacturing firms in Nigeria. This study aimed at reviewing the accounting for inflation and current price financial reporting of manufacturing firms in Nigeria. Extant literature was reviewed and analyzed. Findings suggested that changing price level, otherwise called inflation, has a significant effect on current price financial reports of listed manufacturing firms in Nigeria. Thus, recommends that manufacturing firms should report financial statements on the basis of current prices in order to give a more realistic information of their performances.

keywords:

changing price level, inflation, current price, manufacturing firms, financial reporting.

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