IMPACT OF FAIR VALUE ACCOUNTING ON THE FINANCIAL REPORTING QUALITY OF LISTED DEPOSIT MONEY BANKS IN NIGERIA

Following the introduction of IFRS 13 which mandates companies to value and report their assets and liabilities at current market values, there has been a debate on whether this new valuation technique has increased the quality of financial reporting. This study therefore assessed the effect of FVA on financial statements’ quality of listed deposit money banks in Nigeria. The study adopted an ex-post facto research design and selected a sample of 6 deposit money banks in Nigeria using a purposive sampling technique. Audited financial statements of the banks were obtained and covered a period of 24 years (2000 to 2023), 12 years of historical cost accounting (2000 to 2011) and 12 years of fair value accounting (2012 to 2023). Share price was used as a proxy for fair value which represents the independent variable while earnings quality (EQ), Earnings predictability (EP) and Accrual quality (AQ) were used as proxies for financial statements’ quality and were used as dependent variables in the study. Data was analysed using regression analysis with the aid of Stata version 13. The paired t-test was used to analyse differences between FVA and HCA based financial statements. The t-test statistic was used to test the hypotheses at 5% level of significance. Results of the analysis indicate that FVA has a positive and significant effect on both earnings quality, earnings predictability and accrual quality. The comparison of EQ, EP and AQ under the two measurement approaches show that EQ and AQ are higher under FVA than HCA and the difference is statistically significant. EP was higher under FVA than HCA but the difference was not statistically significant. The study therefore concludes that FVA has increased the quality of financial reports of listed DMBs in Nigeria.