Fair Value Measurement versus Historical Cost Accounting: A Comparative Effect on Firms’ Performance in Nigeria

Leonard I. Amaefule, Emma I. Okoye, Edith O. Kalu, Stanley U. Nwosu


This study comparatively examined the effect of fair value measurement (FVM) and historical cost accounting (HCA) on the performance of quoted firms in Nigeria. Data were sourced from the online published accounts of ten quoted firms for a period of ten years segregated into HCA regime (2007 – 2011) and FVM regime (2012-2016). Descriptive Statistics (Mean) and Inferential Statistics (Paired sample t-test) were employed in the analysis of the data collected with the aid of Statistical Package for the Social Sciences (SPSS) version 21. Findings from the analysis revealed that a positive but insignificant difference exists in the profit after tax of the firms between the FVM and HCA regimes; and that fair value measurement exerts negative but insignificant effect on the earnings per share and return on equity of the firms. The study thus concluded that fair value measurement as it is being practiced and implemented by Nigerian firms, exerts no significant change in firms’ performance as was reported under the HCA regime. It therefore recommended, among other things, that the International Accounting Standards should review the current provisions on the fair value practices in the International Financial Reporting Standards to ensure improved operations of firms across national borders.

Key Words: Fair Value Measurement, Historical Cost, performance, Earning per Share, Profit after Tax, Return on Assets

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ISSN (Paper)2222-1697 ISSN (Online)2222-2847

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