2023 PUBLICATION

 IMPACT OF FAIR VALUE ACCOUNTING ON EARNINGS QUALITY OF LISTED NIGERIAN DEPOSIT MONEY BANKS

Abstract

In pursuants of increase quality of financial reporting, Nigeria adopted International Financial Reporting Standards (IFRS), which introduced fair value measurement for financial assets and liabilities. This study examined whether the quality of earnings reported by deposit money banks in Nigeria is affected by the fair value accounting (FVA) system, in which changes in value of the assets/liabilities  is recognised in the income statement. The study used a correlational research design and analyzed data obtained over the period 2016 to 2021, from thirteen banks in Nigeria.  Two hypotheses were tested using ordinary least squares (OLS) via SPSS(16 Ver). The result shows that earnings quality(EQ) reported by Nigerian DMBs is positively and significantly associated with the proportion of fair value gains/losses reported in net income (NI). While the proportion of fair value gains/losses in other comprehensive income are not significantly associated with earnings quality reported by listed Nigerian DMBs. The study is consistent with the agency theory used to frame the research. We also recommend that managers of DMBs should use observable market input (quoted price) in FV estimation of traded and non- cash hedged financial assets/liabilities, and for the non-traded and cash hedged financial assets/liabilities, FV estimation should be made in strick compliance with IFRS 13 disclosure requirements and CBN prudential guidelines to avoid misleading financial statement users. For further research, there is need to deepen the investigation by reclassifying the gains/losses base on the hierarchical input used(IFRS 13) in estimating the financial assets/liabilities and observe the moderating influence of CG on the relationship.

Keywords: Fair value gains and losses, earnings quality, International Financial Reporting Standards (IFRS)

Authors:
Gimba Keni A.

Ahamad Bello (Ph.D)    

Abddulkadir Madaki(Ph.D)