Property Investment Measurement (IAS 40) And Quality of Financial Statements of Listed Pharmaceutical Firms in Nigeria

Abstract

Pharmaceutical companies in Nigeria encounter several unique challenges when applying IAS 40 for the measurement of investment properties. These challenges are largely due to the complexity of the standards, management's potential manipulation of financial results, and Nigeria's unique economic and regulatory context. This study investigated the impact of investment property measurement under IAS 40 on the financial reporting quality of listed pharmaceutical companies in Nigeria. A cross-sectional survey design was employed, collecting data from selected pharmaceutical companies using structured questionnaires. The study analyzed responses from 95 employees through multiple regression analysis with SPSS 25. The results indicated that the cost method had a positive insignificant effect on the reliability of financial statements (β1 = 0.009; p = 0.532 > 0.05). In contrast, the fair value method for measuring investment property demonstrated a positive and significant effect on the reliability of financial statements in Nigerian pharmaceutical companies (β2 = 0.203; p = 0.032 < 0.05). Similarly, while the cost method had a positive effect on the comparability of financial statements (β1 = 0.051), this relationship was not statistically significant (p = 0.423 > 0.05). However, the fair value method showed a significant positive effect on the comparability of financial statements (β2 = 0.355; p = 0.017 < 0.05). The study recommends that Nigerian pharmaceutical firms adopt the fair value method for measuring investment properties to enhance financial statement reliability and comparability, promoting more transparent and accurate financial reporting.