Investigation of Value Relevance of Cash Flows, Current Accruals and Non-current Accruals relative to the Value Relevance of Earnings

ABSTRACT: Useful information is the base of decisions by people who are participating in the capital market. Determiners of accounting standards try to provide financial reporting and information needs of the accounting systems of the capital markets. Therefore, evaluating the usefulness of accounting information in stock value or relevance of accounting information in company value, which has been paying much attention in recent researches, has been discussed as a role model in the research of financial accounting. In this study, the content of various classified information benefits, including a combination of operating cash flow measurements, current accruals, non-current accruals, is paid in four models to propose an optimization model for classifying the information content of accounting earnings components. To test research hypothesis, statistical method of data combination, with the use of financial data of 103 listed companies in Tehran Security Exchange during the years of 2005 to 2010, has been used. The findings of the research show that as the earnings is changed into smaller parts, the changes in market value will be further clarified, i.e. the market value of the prediction error is decreased. On the other hand, the results show that operating cash flow compared with the ratio of total accruals, current accruals contain more information and the current accruals of earnings have incremental value relevance to non-current accruals.