Historic Cost Accounting versus Fair Value Accounting: A
Comparative Effect on Profitability: Evidence from Nigeria
Quoted Manufacturing Firms

Amaefule Leonard Ph.D; Awheme Blessing Ewoma M.Sc.; Okoro Charles Ugochukwu HND; M.Sc. ANAA; Davies; Stanley Diepiriye; M.Sc.
ACA; ACIT; ANAA

Historic Cost Accounting versus Fair Value Accounting: A Comparative Effect on Profitability: Evidence from Nigeria Quoted Manufacturing Firms

Amaefule Leonard Ph.D, Awheme Blessing Ewoma M.Sc., Okoro Charles Ugochukwu HND, M.Sc. ANAA & Davies, Stanley Diepiriye, M.Sc. ACA, ACIT, ANAA

Abstract

This study examined the effect of Historic Cost Accounting (HCA) and Fair Value Accounting (FVA) practices on profitability of quoted manufacturing firms in Nigeria. Secondary data was obtained from 10 quoted manufacturing firms from 2015 - 2019 from the Nigerian Stock Exchange Fact book and annual reports of the quoted manufacturing firms. The variables considered were profit after tax as dependent variable while historic cost of equity, historic cost of non-current assets, fair value cost of equity and fair value cost of non- current assets were used as predictor variables. Panel data methodology was employed and the fixed effects model was used as estimation technique at 5% level of significance. Fixed effects, random effects and pooled estimates were tested and the Hausman test was used to determine the best fit. The fixed effect result shows fair value accounting can explain 55.1 percent variation on profit after tax. The beta coefficient of the variables shows that the variables have positive no significant effect on profit after tax of the manufacturing firms while historic cost accounting explain 72.5 percent variation on profit after tax. The beta coefficient of the variables shows that the variables have positive but no significant effect on profit after tax of the manufacturing firms. The study observed that there is ambiguity in the interpretation of the instrument conveying the principles, recommendations and application of fair value accounting method and this has given rise to several arbitrary and conflicting interpretations – especially as it suits the reporting body corporate. Premised upon the foregoing, the study recommends among others that accounting professionals and research fellows; relevant accounting institutions and government agencies, and system operators should continue to address the issue of measurement with a view to providing sustainable solution

Keywords

Historic Cost AccountingFair Value AccountingProfit after TaxNon-Current AssetsCost of Equity

References

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Historic Cost Accounting versus Fair Value Accounting: A Comparative Effect on Profitability: Evidence from Nigeria Quoted Manufacturing Firms

Abstract

Keywords

References

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