KIJHUS Volume. 1, Issue 2 (2020)

The effect of fair values on the earnings quality of selected banks in Nigeria is the main thrust of this work. To achieve this, the relationship between fair values and earnings quality was examined to determine its nature, and the effect of fair value adoption on earnings quality. Ten banks were purposively selected for the study using the data on their annual financial statements for period, 2012- 2016, for analyses. The dependent variable is earnings quality (EQ), proxied by predictability (PRED) of earnings; while the independent variables are fair value through other comprehensive income (FVTOCI), log of total asset values (SIZE) and leverage (LEV). Employing ex-post facto research design using the panel data regression and correlation tests for analyses. The results showed that all the independent variables (FVTOCI, SIZE and LEV) have significant relationship with the dependent variable (EQ). The F-statistic, 0.000070 is significant at 5% level of significance. The adjusted R2 indicated that about 49.61% variation in the EQ is as a result of FVTOCI, SIZE and LEV. The remaining 50.39% variation is due to variables not reflected in this model. It is recommend that management of banks should consider the state of the stock market and the economic climate while adopting fair value., Financial Statement regulators need  to be forthcoming on conditions that favour the application  of fair values in order not  to impair  earnings quality of banks.