Cite this article
Gordon, E.A., Henry, E., Jorgensen, B.N. et al. Flexibility in cash-flow classification under IFRS: determinants and consequences. Rev Account Stud 22, 839–872 (2017).
Share this article
We initially document variation in classification choices within a hand-collected sample of 798 nonfinancial IFRS firms in 13 European countries from 2005 to 2012. About 76, 60, and 57% of the sample classifies interest paid, interest received, and dividends received, respectively, in OCF. Only about 42% of the sample firms that report all three items opt to classify all three in OCF. We document significant variation in classification across industries and most countries.
Variation in classification of cash flow items also introduces noncomparability payday loans Gallatin TN into measurement of widely used metrics, such as accruals and free cash flow. Footnote 6 Therefore the final set of analyses focuses on consequences of flexibility in classification choice. The first consequence we examine pertains to the market pricing of persistence of cash flows and accruals. We examine whether the persistence of cash flows and accruals differs for firms that report consistent with U.S. GAAP, compared to those making classification choices permitted under IFRS. Continue reading “EXAMPLE OF EFFECTS OF RECLASSIFICATION ON OPERATING CASH FLOWS”