The moderating effect of serial correlation of changes in operating cash flow on the relationship between operating cash flow and accruals

Subject Areas :

Siavash Eftekharifar ¹ , Majid Azimi Yancheshmeh ^{2 *} , Maryam Farhadi ³ , Mohsen Sadeqi ⁴

1 - Department of Accounting, Mobarakeh Branch, Islamic Azad University, Isfahan, Iran.
2 - Department of Accounting, Mobarakeh Branch, Islamic Azad University, Isfahan, Iran.
3 - Department of Accounting, Mobarakeh Branch, Islamic Azad University, Isfahan, Iran.
4 - Department of Accounting, Mobarakeh Branch, Islamic Azad University, Isfahan, Iran.

Received: 2023-05-13 Accepted : 2024-10-01 Published : 2024-12-28

Keywords: Accruals, serial correlation in cash-flow changes, Timing, Matching.,

Abstract :

Realistically accruals are fundamental facts of accounting that are accurately reflected in the specific context of accounting. The primary purpose of this study is to investigate the effect of serial correlation of change in cash flows as a moderating variable on the relationship between operating cash flows and accruals, which leads to improving the excellent quality of accruals estimates. This study introduces a comprehensive model of the simultaneous use of revenue changes and cash flow changes to explain accruals. Accruals are carefully described by spending the operating-cycle length and serial correlation in cash-flow changes that reflect the characteristics of cash flows. The hypotheses of this research have been investigated using multivariate linear regression and Stata statistical software (version 18). This study's results provide that the operating cash flows have a significant negative relationship with working capital accrual items. Cash flows explain accruals and support the serial correlation in cash-flow changes between cash flows and accruals. The findings indicate that using sales returns and operating-cycle length to calculate serial correlation in changing cash flows is more valuable than the first-order autocorrelation of operating cash flows.