Predicting Accruals Based on Cash-Flow Properties and Revenue Changes

Given the role and importance of financial statements in predicting cash flows and consequently the importance of accrual accounting as the originator of these reports, many studies have investigated the role of accruals in predicting future cash flows. But in this study, the role of cash flows and their characteristics (including timing and matching) as well as the complementary role of cash flow variables and income variables in predicting accruals have been investigated.

In this regard, the research hypotheses were formulated according to the theoretical foundations and 124 companies listed in Tehran Stock Exchange during the period1388 to 1397 were selected and the hypotheses were tested by regression analysis.

The results show that changes in firm earnings have a positive and significant effect on accruals, and the firm's operating cash cycle significantly affects this relationship. Changes in cash flows also have a significant effect on accruals and, according to forecasts, increased serial correlation of cash flows changes has a significant effect on this relationship.