Do Direct Cash Flow Disclosures Help Predict Future Operating Cash Flows and Earnings?

• Main Authors: Orpurt, Steven F., ZANG, Yoonseok
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2009
• Subjects: statement of cash flows; direct method; forecasting future cash flows and earnings; future earnings response coefficient (FERC); stock price informativeness; Accounting; Corporate Finance
• Online Access: https://ink.library.smu.edu.sg/soa_research/272; https://ink.library.smu.edu.sg/context/soa_research/article/1271/viewcontent/Direct_cash_flow_disclosures_predict_2007_sv.pdf
• Institution: Singapore Management University

Motivated by recent FASB, IASB, and CFA Institute comments, we explore the predictive value of direct method cash flow disclosures. A primary stated purpose of the direct method is to better forecast future performance. To examine this purpose, we first document that direct method line items, such a...