Justifying the Concept of Fair Value as a Theory through International Financial Reporting Standard (IFRS)

Abstract

The objective of the study is to justify the concept of fair value as a theory through International financial Reporting Standard (IFRS). This paper examined what effect would this newly adopted measurement of valuing assets and liabilities have on reported profit disclosed in the financial statement. Three theories that are of interest to this study, depreciation theory, asset theory and profitability theory were reviewed. The study used ex-post factor research design using data analysis of financial information extracted from audited financial statement for the  periods 2009 to 2011 (Pre-IFRS) and 2012 to 2014 (Post-IFRS) which was used to examine how independent variables affects dependent variables during N-GAAP and after adoption of IFRS. In order to arrive at conclusion data of twelve (12) companies in the consumers sector of the manufacturing industry quoted on the Nigerian Stock Exchange analyzed using multiple regression. Findings revealed that Pre-IFRS adoption strengthens the determinants of reported profits as compared to the reported profit during Post-IFRS. It is recommended that companies should be encouraged to use fair value accounting when preparing their financial report.

Keywords: Fair value, Fair Value Measurement, Financial Assets, International Financial Reporting Standard, Non- Financial Assets