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International Journal of Economics & Management Sciences

.: Home > International Journal of Economics & Management Sciences > 2012 > Volume 1 Number 8 > Dr. Musa Inuwa Fodio *1 , Dr. Yinka Mashood Salaudeen 2

Comparative Analysis Of The Value Relevance Of Historical Cost Accounting And Inflation-Adjusted Accounting Information

Dr. Musa Inuwa Fodio *1 , Dr. Yinka Mashood Salaudeen 2
*1 Corresponding author: Department of Accounting, Faculty of Management Sciences, University of Abuja, P.M.B.114, Abuja, Nigeria 2 Department of Accounting, Faculty of Management Sciences, University of Abuja, P.M.B.114, Abuja, Nigeria
Abstract :

This study investigates the comparative value relevance of historical cost accounting and inflation adjusted accounting information in Nigeria. Historical cost financial statements of a sample of companies obtained from the Nigerian Stock Exchange were restated using the Parker 1977 approach and instrumental variable equations were constructed to adjust the independent variable for measurement errors. Regression analysis has been used to measure the joint effect of the earning numbers on security prices. Our results show that historical cost information has the potency of distorting, though not significantly, the accounting information provided to decision makers. Our findings also show that historical cost information is more value relevant than inflation adjusted accounting information. However, the value superiority was not found to be statistically significant. Furthermore, our findings show that the information content of inflation adjusted data beyond those of historical cost have statistically significant incremental explanatory power over and above those of historical cost. Consequently, it is recommended that policy makers in Nigeria should encourage firms to provide inflation adjusted information to compliment, rather than replace, the conventional historical cost financial information provided in annual reports. 

Keywords :
Historical cost, Inflation accounting, Nigerian Stock Exchange, Value relevance

Date Deposited : 24 May 2016 20:07

Last Modified : 24 May 2016 20:07

Official URL: http://www.omicsonline.com/

Volume 1, Number 8, August 2012 , ISSN 2162-6359

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