Accrual and cash flow accounting models: a comparison of the value relevance and timeliness of their components

Cotter, Julie (1996) Accrual and cash flow accounting models: a comparison of the value relevance and timeliness of their components. Accounting and Finance, 36 (2). pp. 127-150. ISSN 0810-5391

Abstract

This research uses the empirical framework developed by Easton, Harris and Ohlson (1992)to examine the relative ability of the accrual and cash flow accounting models to capture value relevant events. In particular, components of clean surplus accrual earnings are compared with components of total cash flows to determine their relative abilities to recognise value relevant events in a timely manner. The results indicate that the association between stock returns and earnings is higher than that with total cash flows for return intervals of between one and ten years. Cash flows from operations and current accruals are able to recognise value relevant events in a timely manner, while non-current and non-operating accruals only became consistently value relevant when longer return intervals are considered. Cash flows from investing and financing activities are less value relevant than the other components considered, especially over longer return intervals.


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Item Type: Article (Commonwealth Reporting Category C)
Refereed: Yes
Item Status: Live Archive
Additional Information: Permanent restricted access to published version due to publisher copyright policy.
Depositing User: Prof. Julie Cotter
Faculty / Department / School: Historic - Faculty of Business - Department of Accounting
Date Deposited: 09 Aug 2011 06:16
Last Modified: 03 Jul 2013 00:40
Uncontrolled Keywords: cash flows; accruals; timeliness; value relevance
Fields of Research (FOR2008): 15 Commerce, Management, Tourism and Services > 1501 Accounting, Auditing and Accountability > 150103 Financial Accounting
15 Commerce, Management, Tourism and Services > 1502 Banking, Finance and Investment > 150205 Investment and Risk Management
15 Commerce, Management, Tourism and Services > 1501 Accounting, Auditing and Accountability > 150101 Accounting Theory and Standards
Socio-Economic Objective (SEO2008): B Economic Development > 90 Commercial Services and Tourism > 9001 Financial Services > 900101 Finance Services
Identification Number or DOI: doi: 10.1111/j.1467-629X.1996.tb00303.x
URI: http://eprints.usq.edu.au/id/eprint/19162

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