Fair Value Accounting and Earnings Predictability of Listed Deposit Money Banks in Nigeria

The study examined the effect of fair value accounting on predictive power of earnings of listed Deposit Money banks (DMBs) in Nigeria. Fair value accounting has been a subject of serious concern in corporate finance and accounting literature following the adoption of International Financial Reporting standards. Data were collected from all the fifteen DMBs listed on the Nigerian stock exchange between 1st January 2011 and 31st December 2015. In analyzing the collected data, the study adopted descriptive statistics, correlation analysis and a panel multiple regression analysis to identify the possible effects of fair value accounting on predictive power of earnings. The results revealed that fair value accounting significantly enhances earnings predictability. The results further established that where as fair value hierarchy level one does not significantly enhance earnings predictability of listed DMBs in Nigeria, level two and three was found to be negatively and significantly influencing earnings predictability. This implies that level two and three significantly reduces earnings predictability of listed DMBs in Nigeria. Therefore, it is recommended that Financial Reporting Council of Nigeria should develop valuation guidelines that must be followed enhance reliability of fair value measurement in Nigeria.