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Price Level Changes and Financial Accounting Measurement:Empirical Evidences from Nigeria

Modugu, Prince Kennedy and Okafor, Chinwuba A. and Ohonba, Nosa (2012) Price Level Changes and Financial Accounting Measurement:Empirical Evidences from Nigeria. Journal of Management and Corporate Governance, 4. pp. 72-82. ISSN 2277-0089

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This study discusses the impact of price level changes on financial accounting numbers. Previous studies on the subject have merely reproduced historical financial statements alongside ‘inflation-adjusted’ financial statements without any scientific methodology and empirical analyses to allow for reliable conclusions. It is this major gap that this study seeks to fill. A sample of ten firms was drawn for period between2001-2010. The OLS regression estimated at nominal and adjusted levels in two separate models showed that both models have a high goodness of fit (R2 ). However, the adjusted estimate exhibited a higher explanatory power and thus shows a better fit. This suggested that adjusted accounting estimates may after all be able to provide better and more realistic insight into a firm’s state of affairs. The study recommends that historical financial accounting information should be presented side-by-side with their corresponding adjusted financial statement to disclose the effect of price level changes. Additionally, the Financial Reporting Council of Nigeria and other regulatory agencies should as a matter of necessity set up a system of accounting for price level changes to enhance the value relevance of accounting information

Item Type: Article
Uncontrolled Keywords: price level changes, value relevance, accounting information, inflation
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: 14 Oct 2014 16:08
Last Modified: 14 Oct 2014 16:08

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