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CNOOC Ltd. (CEO) | Aggregate Accruals

Earnings can be decomposed into cash and accrual components. The accrual component (aggregate accruals) has been found to have less persistence than the cash component, and therefore (1) earnings with higher accrual component are less persistent than earnings with smaller accrual component, all else equal; and (2) the cash component of earnings should receive a higher weighting evaluating company performance.


Balance-Sheet-Based Accruals Ratio

CNOOC Ltd., balance sheet computation of aggregate accruals

USD $ in millions, translated from CNY ¥

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    Dec 31, 2012 Dec 31, 2011 Dec 31, 2010 Dec 31, 2009 Dec 31, 2008
  Operating Assets
Total assets 73,204  61,053  49,686  35,492  30,292 
Less: Financial assets 9,919  8,110  3,330  1,257  1,709 
Less: Time deposits with maturity over three months 2,711  3,889  1,815  3,057  3,122 
Less: Cash and cash equivalents 8,832  3,762  5,996  3,313  2,897 
Operating assets 51,743  45,293  38,545  27,865  22,564 
  Operating Liabilities
Total liabilities 23,481  19,290  16,994  10,011  6,806 
Less: Current loans and borrowings 4,628  3,165  3,277  18  2 
Less: Non-current loans and borrowings 4,664  2,872  1,775  2,721  2,032 
Operating liabilities 14,190  13,253  11,941  7,272  4,771 
   
Net operating assets1 37,553  32,040  26,604  20,592  17,793 
Balance-sheet-based aggregate accruals2 5,513  5,436  6,012  2,799   
  Balance-Sheet-Based Accruals Ratio, Comparison to Industry
CNOOC Ltd.3 15.84% 18.54% 25.48% 14.58%  
  Industry, Oil & Gas 6.47% 8.98% 14.76% 17.42%  

2012 Calculations

1 Net operating assets = Operating assets – Operating liabilities
= 51,743 – 14,190 = 37,553

2 Balance-sheet-based aggregate accruals = Net operating assets 2012 – Net operating assets 2011
= 37,553 – 32,040 = 5,513

3 Balance-sheet-based accruals ratio = 100 × Balance-sheet-based aggregate accruals ÷ Avg. net operating assets
= 100 × 5,513 ÷ [(37,553 + 32,040) ÷ 2] = 15.84%

Ratio Description The company
Balance-sheet-based accruals ratio Ratio is found by dividing balance-sheet-based aggregate accruals by average net operating assets. Using the balance-sheet-based accruals ratio, CNOOC Ltd. improved earnings quality from 2011 to 2012.

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Cash-Flow-Statement-Based Accruals Ratio

CNOOC Ltd., cash flow statement computation of aggregate accruals

USD $ in millions, translated from CNY ¥

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    Dec 31, 2012 Dec 31, 2011 Dec 31, 2010 Dec 31, 2009 Dec 31, 2008
Profit for the year attributable to owners of the parent 10,223  11,162  8,244  4,320  6,504 
Less: Net cash flows from operating activities 15,351  18,588  12,733  7,889  8,427 
Less: Net cash flows used in investing activities (11,026) (16,130) (9,978) (6,090) (7,442)
Cash-flow-statement-based aggregate accruals 5,899  8,704  5,489  2,521  5,519 
  Cash-Flow-Statement-Based Accruals Ratio, Comparison to Industry
CNOOC Ltd.1 16.95% 29.69% 23.26% 13.13%  
  Industry, Oil & Gas 9.25% 10.57% 8.52% 9.18%  

2012 Calculations

1 Cash-flow-statement-based accruals ratio = 100 × Cash-flow-statement-based aggregate accruals ÷ Avg. net operating assets
= 100 × 5,899 ÷ [(37,553 + 32,040) ÷ 2] = 16.95%

Ratio Description The company
Cash-flow-statement-based accruals ratio Ratio is found by dividing cash-flow-statement-based aggregate accruals by average net operating assets. Using the cash-flow-statement-based accruals ratio, CNOOC Ltd. improved earnings quality from 2011 to 2012.

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