The verifiability requirement prevents the full capitalization of future cash flow effects in earnings. When future net cash inflows are highly probable from an outlay, but their magnitude is not verifiable, the accrual process generally excludes the outlay from current earnings and capitalizes the cost as an asset (., cash outlays for the purchase of inventory or plant). The effect of the exclusion of future cash inflows and their associated current outlays from earnings on the time series properties of earnings is 'a priori' unclear. However, we expect the inclusion of verifiable anticipated future cash flows in earnings (such as.
