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An Empirical Analysis of Reported Profits of Nigerian Companies: Inventory Valuation Effects

Emeni, F. K. and Okafor, Chinwuba A. (2007) An Empirical Analysis of Reported Profits of Nigerian Companies: Inventory Valuation Effects. The Nigerian Accounting Horizon, 1 (1). pp. 56-63.

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Abstract

The purpose of this paper is to examine profits reported in the financial statements of companies operating in Nigeria in order to ascertain whether they are real or paper profit. To achieve this objective, the Last-In-First-Out(LIFO),First-In-First-Out(FIFO) method and Weighted Average Cost(WAC) methods of inventory valuation were used to analyse the data gathered .it was found that, companies operating in Nigeria use the FIFO method for valuing their stock. The sampled companies posted the highest profit using the FIFO method when compared with other methods(LIFO and WAC). The conclusion was that companies in Nigeria report ‘paper profit’…It was recommended that, the Nigerian Statement of Accounting Standard(SAS) No. 4 on Stock should be reviewed and recommend the use of LIFO method just as in most developed countries like United States of America to forestall the reporting of paper profit in Nigeria. JEL: M41

Item Type: Article
Uncontrolled Keywords: inventory valuation, paper profit
Subjects: H Social Sciences > HF Commerce > HF5601 Accounting
Divisions: Faculty of Law, Arts and Social Sciences > School of Management
Depositing User: Mr Solomon Bayoko
Date Deposited: 16 Sep 2014 14:30
Last Modified: 16 Sep 2014 14:30
URI: http://eprints.covenantuniversity.edu.ng/id/eprint/2762

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