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The Predictability of FASB and IASB Operating Cash Flow
Rick N Francis, University of Northern Iowa
Karen R Nunez, North Carolina State University
ABSTRACT. This study illustrates how the implementation of certain International Accounting Standards Board (IASB) cash flow reporting requirements would affect constituents of the Financial Accounting Standards Board (FASB). This study uses FASB constituent data to generate a pro-forma IASB operating cash flow measure, then compares the out-of-sample predictability of this measure with the FASB cash flow measure as specified in SFAS 95. The out-of-sample results indicate that historical pro-forma IASB operating cash flows predict future operating cash flows more accurately than their FASB counterparts. A pro-forma IASB earnings components model (i.e. cash flows and individual operating accruals) also demonstrates greater cash flow forecast accuracy than the FASB model.
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