Direct or Indirect Cash Flow Statements?

Michael Eric Bradbury

52 citations0/0 files storedAustralian Accounting Review

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Auditing, Earnings Management, Governance Accounting Theory and Financial Reporting Financial Reporting and XBRL

Abstract

The Australian Accounting Standards Board (AASB) and the Financial Reporting Standards Board (FRSB) have issued a joint proposal that will allow reporting entities to choose between the direct and indirect method of reporting cash flow statements. This evidence presented in this paper indicates that the direct cash flow reporting format, relative to the indirect method, leads to better prediction of future firm performance and has a stronger association with share prices. The AASB and the FRSB have to decide whether to support high quality reporting or harmonisation.

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2017Accounting Research in Abacus, A&F, AAR, and AJM from 2008–2015: A Review and Research Agenda 2013The Value Relevance of Direct Cash Flows under International Financial Reporting Standards 2012The usefulness of operating cash flow and accrual components in improving the predictive ability of earnings: a re-examination and extension 2020The IASB and Comparability of International Financial Reporting: Research Evidence and Implications

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