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Vale S.A. (VALE) | 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

Vale S.A., balance sheet computation of aggregate accruals

USD $ in millions

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    Dec 31, 2012 Dec 31, 2011 Dec 31, 2010 Dec 31, 2009 Dec 31, 2008
  Operating Assets
Total assets 131,478  128,728  129,139  102,279  79,931 
Less: Cash and cash equivalents 5,832  3,531  7,584  7,293  10,331 
Less: Short-term investments 246  – 1,793  3,747  2,308 
Operating assets 125,400  125,197  119,762  91,239  67,292 
  Operating Liabilities
Total liabilities 55,115  48,614  56,698  41,782  34,884 
Less: Current portion of long-term debt 3,468  1,495  2,823  2,933  633 
Less: Short-term debt – 22  139  30  –
Less: Long-term debt, excluding current portion 26,799  21,538  21,591  19,898  17,535 
Operating liabilities 24,848  25,559  32,145  18,921  16,716 
   
Net operating assets1 100,552  99,638  87,617  72,318  50,576 
Balance-sheet-based aggregate accruals2 914  12,021  15,299  21,742   
  Balance-Sheet-Based Accruals Ratio, Comparison to Industry
Vale S.A.3 0.91% 12.84% 19.13% 35.38%  
  Industry, Basic Materials 10.05% 11.14% 16.73% 16.10%  

2012 Calculations

1 Net operating assets = Operating assets – Operating liabilities
= 125,400 – 24,848 = 100,552

2 Balance-sheet-based aggregate accruals = Net operating assets 2012 – Net operating assets 2011
= 100,552 – 99,638 = 914

3 Balance-sheet-based accruals ratio = 100 × Balance-sheet-based aggregate accruals ÷ Avg. net operating assets
= 100 × 914 ÷ [(100,552 + 99,638) ÷ 2] = 0.91%

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, Vale S.A. improved earnings quality from 2011 to 2012.

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Cash-Flow-Statement-Based Accruals Ratio

Vale S.A., cash flow statement computation of aggregate accruals

USD $ in millions

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    Dec 31, 2012 Dec 31, 2011 Dec 31, 2010 Dec 31, 2009 Dec 31, 2008
Net income attributable to the Company's stockholders 5,511  22,885  17,264  5,349  13,218 
Less: Net cash provided by operating activities 16,595  24,496  19,669  7,136  17,114 
Less: Net cash used in investing activities (15,347) (14,069) (17,184) (13,159) (11,401)
Cash-flow-statement-based aggregate accruals 4,263  12,458  14,779  11,372  7,505 
  Cash-Flow-Statement-Based Accruals Ratio, Comparison to Industry
Vale S.A.1 4.26% 13.31% 18.48% 18.51%  
  Industry, Basic Materials 9.39% 11.83% 7.01% 8.41%  

2012 Calculations

1 Cash-flow-statement-based accruals ratio = 100 × Cash-flow-statement-based aggregate accruals ÷ Avg. net operating assets
= 100 × 4,263 ÷ [(100,552 + 99,638) ÷ 2] = 4.26%

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, Vale S.A. improved earnings quality from 2011 to 2012.

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