The Effect of Nominal and Real Reporting Difference in Predicting Cash Flows of Companies in Tehran Stock Exchange

One main goal of an accounting system is providing on time, reliable and relevant information for the users of those information. Traditional basis of accounting for information provision is using historical values since these values are reliable and can be proved. When in developed countries, inflation caused asymmetry in economic structure, accounting and economic scholars tried to find new methods for dealing with these issues. Providing solutions in the frame of accounting standards such as FASB-33 in America and SSAP-16 in England, accountants mitigated created problems for accounting to some extent. This study aims to examine the effect of profit and loss from inflation in predicting cash flows of companies in Tehran Stock Exchange. In this regard, two hypotheses were formulated. Results show that unrecognized inflation profit has a positive correlation with future cash flows while it has no correlation with future cash flows.

Keywords: Real Reporting, Stock Exchange, Cash Flows, Historical Value

JEL Classification: G10, M00

Suggested Citation: Suggested Citation

Toosi, Saeed and Karbalai, Mohammad Hosein and Parsian, Hossein and Shams Koloukhi, Amir, The Effect of Nominal and Real Reporting Difference in Predicting Cash Flows of Companies in Tehran Stock Exchange (April 9, 2015). International Journal of Empirical Finance, Vol. 4, No. 1, 2015, 47-52, Available at SSRN: https://ssrn.com/abstract=2593251 or http://dx.doi.org/10.2139/ssrn.2593251