Clean Surplus Accounting and Quality of Financial Reports of Oil and Gas Firms in Niger Delta Region, Nigeria: The Hausman and Cointegration Tests Approach

Abstract

Clean surplus accounting is the reported financial statement on comprehensive income of business organizations. The study ascertains the effect of reported profits on value of assets and value of liabilities. The population consists of the 13 oil and gas listed firms under the Nigerian Exchange Group as at 27 January, 2024. The sample size comprises 6 of the oil and gas listed firms whose activities were based on extraction, marketing and distribution were selected using judgmental sampling techniques based on their market size and share value. The study employs quantitative method with data obtained from the annual financial reports of the listed-oil and gas extraction, marketing and distribution firms from the period 2009-2023. The study employs regression analysis to analyze the data and uses three econometric models to achieve the empirical results with the aid of E-views 12.0. The findings reveal that reported profit has positive significant effect on value usefulness of assets with a long run effect, but has no positive significant effect, yet it has a long run effect on the value usefulness of liabilities of the firms. The study established that accounting information drafted from reported profit of companies has positive significant effect on the value usefulness of assets, but has no positive significant effect on the value usefulness of liabilities of the firms. The study also established that the statement of comprehensive income being projected by clean surplus accounting method is an effective and reliable measure of companies’ assets value, however the method is ineffective and not reliable to measure companies’ liabilities value. The accounting method has the propensity to reduce earnings management
problem, yet it has the propensity to increase earnings manipulation problem, in order to enhance the quality of financial reports.