This study aims to test the effect of accounting conservatism to current
earnings in predict future cash flows. Accounting conservatism is measured by
nonoperating accruals, this model is develop by Givoly and Hayn (2000). Samples
in this study are manufacturing companies listed in Indonesia Stock Exchange
from 2000 until 2010 which meets the sample criteria.
This study used t-test approach to test the hypothesis. The result of this
research shows that null hypothesis is accepted and supported. This finding means
accounting conservatism affects the relation between current earnings and future
cash flows. The result of t-test shows that accounting conservatism positively
affects the relation between current earnings and future cash flows. It is said when
the numbers of accounting conservatism increase, the relation between current
earnings and future cash flows will increase as well. This could happen because
several positive impact brought by the application of accounting conservatim.