THE IMPACT OF INFLATION ON HISTORICAL COST CONVENTION IN FINANCIAL ACCOUNTING REPORTING

THE IMPACT OF INFLATION ON HISTORICAL COST CONVENTION IN FINANCIAL ACCOUNTING REPORTING

Project Abstract:

The study empirically examined the Impact of Inflation on Historical Cost Convention in Financial Accounting Reporting.  The objectives were; to examine the effect of depreciation on inflation, to examine the impact of asset on inflation, to evaluate the effect of profitability on inflation and to evaluate the impact of earning per share on inflation.  Secondary sources of data was employed using financial reports of the selected sample firms, ordinary least square of multiple regress model was employed to statistically analyze the relationship between dependent and independent variables.  The findings of the study were depreciation had a significant effect on the cost, Asset is significantly affected by the cost and profitability had a significant effect on historical cost.  The study recommended that historical financial statement should be published together with current cost financial statements.  Also recommended that Accounting bodies in Nigeria should sensitize their members, accountants and managers of companies on the need to depart from the historical cost accounting method during inflationary periods.

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