We identify and predict circumstances where the direct method statement of cash flows is expected to provide more value relevant information to financial statement users. We predict the direct method is more informative when earnings are of lower quality (earnings are less permanent or companies report losses), companies are in a more stable state (proxied by small absolute changes in accruals/operating cash flow), and when cash flows/accruals are measured with more error using the indirect method. Direct method disclosure is also predicted to be more useful for small companies, where investors have fewer alternative sources of information beyond financial statements. We analyze Australian companies because they are required to report the direct and indirect method, and we further decompose the sample into industrial, mining, and company size to account for unique features of the Australian market. Our results are consistent with our predictions. This suggests the indirect method is as informative as the direct method on average but the direct method incrementally informs stock returns in specific circumstances. We also identify operational factors that significantly increase estimation error when estimating direct method line items for cash receipts and cash payments.

我们确定并预测在直接现金流量表中期望为财务报表用户提供更多与价值相关的信息的情况。我们预计，当收益质量较低（收益不是永久性收益或公司报告亏损），公司处于更稳定的状态（应计费用/营业现金流量的绝对值有微小的绝对变化）时，直接方法会提供更多信息。使用间接方法，应计/应计项目会产生更大的误差。还预计直接方法披露对于小型公司更有用，因为小型公司的投资者除了财务报表外，其他信息来源较少。我们对澳大利亚公司进行分析是因为要求它们报告直接和间接方法，然后将样本进一步分解为工业，采矿，和公司规模，以说明澳大利亚市场的独特特征。我们的结果与我们的预测相符。这表明间接法平均而言与直接法一样有用，但是直接法在特定情况下会逐步告知股票收益。在估算现金收入和现金支付的直接方法行项目时，我们还确定了会大大增加估算误差的操作因素。