The ARR is the only method that uses accrual accounting figures and thus making it important to financial statement users.

Question

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The Average Rate of Return (ARR) is a method that uses accrual accounting figures, such as net income and the average investment, to calculate the profitability of an investment project. This makes it important to financial statement users who rely on accrual accounting to analyze the financial performance of a company. Other methods, such as the Payback Period and the Internal Rate of Return, do not use accrual accounting figures and rely on cash flows instead.

The ARR Is the Only Method That Uses Accrual Accounting