Premium
The Value Relevance of Direct Cash Flows under International Financial Reporting Standards
Author(s) -
Clacher Iain,
Ricquebourg Alan Duboisée,
Hodgson Allan
Publication year - 2013
Publication title -
abacus
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.632
H-Index - 45
eISSN - 1467-6281
pISSN - 0001-3072
DOI - 10.1111/abac.12010
Subject(s) - cash flow , accounting , cash flow statement , business , relevance (law) , operating cash flow , international financial reporting standards , cash flow forecasting , accrual , database transaction , terminal value , value (mathematics) , accounting information system , political science , computer science , machine learning , law , earnings , programming language
This study examines if there has been a change in the value relevance of direct cash flow components since the adoption of International Financial Reporting Standards ( IFRS ) in Australia. Our results show that for both industrial and extractive firms direct cash flow statements are value relevant under Australian Generally Accepted Accounting Principles ( AGAAP ) and remain so after the adoption of IFRS . In addition, for industrial firms there is a significant increase in the value relevance of direct cash flows after IFRS , along with an increase in the value relevance of accruals. These results are consistent with the proposition that direct cash flows play a reinforcing role that complements the more complex IFRS accounts. Consequently, if the International Accounting Standards Board ( IASB ) were to mandate direct cash flow statements it would, in all likelihood, provide users of accounts with a valuable incremental source of hard transaction information.