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...

The health-care industry requires large expenditure on research and development (R&D), with many projects undergoing long development cycles, usually with uncertain outcomes. Extant research has mainly concentrated on the health-care industry in the United States, where R&D costs are expensed as...