We provide further evidence of the relationship between accruals and future CFO in the Australian context. Our contribution to the accounting literature stems from linking accruals related to operating, investing and financing activities – as well as their underlying asset and liability components – directly with future CFO. Linking accruals with future CFO is important for assessing the relevance of accruals for firm valuation. Thus, unlike previous studies that have focused on the reliability of accruals (e.g. Richardson et al., 2005; Oei et al., 2008; Lai et al., 2013a), we focus on the relevance of accruals in explaining CFO. A few previous studies (e.g. Barth et al., 2001; Cheng and Hollie, 2008; Farshadfar and Monem, 2013) have investigated the relative relevance of total operating accruals and the individual components of operating accruals with regard to explaining future CFO.1 However, Richardson et al. (2005) showed that ignoring investing and financing accruals in accrual-based research results in a loss of information and noisy measures of both the accrual and cash flow components of earnings. Hence, they called for future research to employ a broader definition and categorisation of accruals that incorporates accruals related to investing and financing activities. Providing further evidence of the usefulness of accruals thus categorised is important and timely, given the joint project between the International Accounting Standards Board (IASB) and the Financial Accounting Standard Board (FASB) that proposes the classification of all financial statement items into operating, investing and financing categories. The boards claimed that this separation could result in information that is more useful in decision-making than the information currently provided.2,3 However, this claim has yet to be tested empirically. Accordingly, we investigate a single but important research question: Does the categorisation of accruals into working capital, non-current operating and financing components enhance the ability of total accruals – and thus of earnings – to explain future CFO? According to Richardson et al.’s (2005) notation, these accrual components relate to the operating, investing and financing activities of a firm. We test our research question in the Australian setting because Australia has a well-developed capital market with a high level of investor protection, and it also has strict enforcement mechanisms (e.g. Leuz et al., 2003; Clarkson et al., 2011; Clinch et al., 2012). Given these factors, the quality of financial reporting is high in Australia (e.g. Cheung et al., 2010). Furthermore, Australia was an early adopter of IFRS. The comprehensive adoption of IFRS in Australia on 1 January 2005 has arguably given rise to the assumption that all preparers and users are familiar with the measurement bases and disclosure requirements under IFRS. More specifically, Australia has had cash flow reporting standards that are in keeping with the UK and the evolving International Standards. Therefore, the Australian setting reduces the possibility that the results of our study are affected by a poor-quality reporting regime or a weak regulatory environment.