Financial Reporting Quality: 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
Apple Inc., balance sheet computation of aggregate accruals
US$ in millions
| Sep 27, 2025 | Sep 28, 2024 | Sep 30, 2023 | Sep 24, 2022 | Sep 25, 2021 | Sep 26, 2020 | ||
|---|---|---|---|---|---|---|---|
| Operating Assets | |||||||
| Total assets | 359,241) | 364,980) | 352,583) | 352,755) | 351,002) | 323,888) | |
| Less: Cash and cash equivalents | 35,934) | 29,943) | 29,965) | 23,646) | 34,940) | 38,016) | |
| Less: Current marketable securities | 18,763) | 35,228) | 31,590) | 24,658) | 27,699) | 52,927) | |
| Operating assets | 304,544) | 299,809) | 291,028) | 304,451) | 288,363) | 232,945) | |
| Operating Liabilities | |||||||
| Total liabilities | 285,508) | 308,030) | 290,437) | 302,083) | 287,912) | 258,549) | |
| Less: Current portion of finance leases | 538) | 144) | 165) | 129) | 79) | 24) | |
| Less: Commercial paper | 7,979) | 9,967) | 5,985) | 9,982) | 6,000) | 4,996) | |
| Less: Current portion of term debt | 12,350) | 10,912) | 9,822) | 11,128) | 9,613) | 8,773) | |
| Less: Non-current portion of term debt | 78,328) | 85,750) | 95,281) | 98,959) | 109,106) | 98,667) | |
| Less: Non-current portion of finance leases | 692) | 752) | 859) | 812) | 769) | 637) | |
| Operating liabilities | 185,621) | 200,505) | 178,325) | 181,073) | 162,345) | 145,452) | |
| Net operating assets1 | 118,923) | 99,304) | 112,703) | 123,378) | 126,018) | 87,493) | |
| Balance-sheet-based aggregate accruals2 | 19,619) | (13,399) | (10,675) | (2,640) | 38,525) | —) | |
| Financial Ratio | |||||||
| Balance-sheet-based accruals ratio3 | 17.98% | -12.64% | -9.04% | -2.12% | 36.09% | — | |
| Benchmarks | |||||||
| Balance-Sheet-Based Accruals Ratio, Competitors4 | |||||||
| Arista Networks Inc. | — | -26.64% | 17.14% | 106.22% | 24.14% | — | |
| Cisco Systems Inc. | 0.44% | 75.07% | -12.09% | 5.96% | 20.24% | — | |
| Dell Technologies Inc. | 18.00% | -9.55% | 12.16% | -89.81% | -10.71% | — | |
| Super Micro Computer Inc. | -0.54% | 105.88% | 3.74% | 58.35% | 8.42% | — | |
| Balance-Sheet-Based Accruals Ratio, Sector | |||||||
| Technology Hardware & Equipment | 0.00% | 11.96% | -6.96% | -13.35% | 22.01% | — | |
| Balance-Sheet-Based Accruals Ratio, Industry | |||||||
| Information Technology | 0.00% | 21.35% | 8.92% | 18.19% | 19.59% | — | |
Based on: 10-K (reporting date: 2025-09-27), 10-K (reporting date: 2024-09-28), 10-K (reporting date: 2023-09-30), 10-K (reporting date: 2022-09-24), 10-K (reporting date: 2021-09-25), 10-K (reporting date: 2020-09-26).
1 2025 Calculation
Net operating assets = Operating assets – Operating liabilities
= 304,544 – 185,621 = 118,923
2 2025 Calculation
Balance-sheet-based aggregate accruals = Net operating assets2025 – Net operating assets2024
= 118,923 – 99,304 = 19,619
3 2025 Calculation
Balance-sheet-based accruals ratio = 100 × Balance-sheet-based aggregate accruals ÷ Avg. net operating assets
= 100 × 19,619 ÷ [(118,923 + 99,304) ÷ 2] = 17.98%
4 Click competitor name to see calculations.
- Net Operating Assets
- The net operating assets displayed a declining trend from 126,018 million USD in 2021 to a low of 99,304 million USD in 2024. Subsequently, there was a rebound in 2025, increasing to 118,923 million USD. This pattern indicates a reduction in operating asset investments or an increase in operating liabilities over the initial four-year period, followed by a partial recovery in the most recent year.
- Balance-Sheet-Based Aggregate Accruals
- Aggregate accruals fluctuated notably over the period. They started at a positive 38,525 million USD in 2021, sharply decreased into negative territory in 2022 (-2,640 million USD) and remained negative through 2024 (-13,399 million USD), before turning positive again in 2025 with 19,619 million USD. The initial substantial positive accruals suggest strong non-cash accounting adjustments, followed by a period dominated by negative accruals, which may indicate cash inflows or reversal of previous accruals, ending with an uptick in positive accruals in 2025.
- Balance-Sheet-Based Accruals Ratio
- The accruals ratio exhibited a similar trend to the aggregate accruals. It started at 36.09% in 2021, quickly declining to negative values in 2022 (-2.12%) and further into negative territory through 2024 (-12.64%), before rising substantially to 17.98% in 2025. This indicates that accruals as a percentage of net operating assets transitioned from a high positive relation in 2021 to a negative proportion for three consecutive years, suggesting a considerable decrease in accrual components relative to operating assets, with a notable reversal towards positive accrual ratios in 2025.
Cash-Flow-Statement-Based Accruals Ratio
Apple Inc., cash flow statement computation of aggregate accruals
US$ in millions
| Sep 27, 2025 | Sep 28, 2024 | Sep 30, 2023 | Sep 24, 2022 | Sep 25, 2021 | Sep 26, 2020 | ||
|---|---|---|---|---|---|---|---|
| Net income | 112,010) | 93,736) | 96,995) | 99,803) | 94,680) | 57,411) | |
| Less: Cash generated by operating activities | 111,482) | 118,254) | 110,543) | 122,151) | 104,038) | 80,674) | |
| Less: Cash (used in) generated by investing activities | 15,195) | 2,935) | 3,705) | (22,354) | (14,545) | (4,289) | |
| Cash-flow-statement-based aggregate accruals | (14,667) | (27,453) | (17,253) | 6) | 5,187) | (18,974) | |
| Financial Ratio | |||||||
| Cash-flow-statement-based accruals ratio1 | -13.44% | -25.90% | -14.62% | 0.00% | 4.86% | — | |
| Benchmarks | |||||||
| Cash-Flow-Statement-Based Accruals Ratio, Competitors2 | |||||||
| Arista Networks Inc. | — | 82.06% | 36.37% | 52.90% | 147.50% | — | |
| Cisco Systems Inc. | -9.79% | 46.78% | -7.65% | -10.18% | 1.64% | — | |
| Dell Technologies Inc. | 12.75% | -15.65% | 11.23% | -20.97% | -17.42% | — | |
| Super Micro Computer Inc. | -7.24% | 98.99% | 0.89% | 56.84% | 5.08% | — | |
| Cash-Flow-Statement-Based Accruals Ratio, Sector | |||||||
| Technology Hardware & Equipment | 0.00% | -2.79% | -10.03% | -4.10% | -0.72% | — | |
| Cash-Flow-Statement-Based Accruals Ratio, Industry | |||||||
| Information Technology | 0.00% | 6.25% | 1.40% | 2.99% | 8.76% | — | |
Based on: 10-K (reporting date: 2025-09-27), 10-K (reporting date: 2024-09-28), 10-K (reporting date: 2023-09-30), 10-K (reporting date: 2022-09-24), 10-K (reporting date: 2021-09-25), 10-K (reporting date: 2020-09-26).
1 2025 Calculation
Cash-flow-statement-based accruals ratio = 100 × Cash-flow-statement-based aggregate accruals ÷ Avg. net operating assets
= 100 × -14,667 ÷ [(118,923 + 99,304) ÷ 2] = -13.44%
2 Click competitor name to see calculations.
The analysis of the annual financial reporting quality measures over the specified periods reveals notable trends in net operating assets and cash-flow-statement-based aggregate accruals.
- Net Operating Assets
- There is a general declining trend observed from September 2021 to September 2024, with values decreasing from approximately 126 billion US dollars to roughly 99 billion US dollars. However, in the final measured period ending in September 2025, the net operating assets increase to approximately 119 billion US dollars, suggesting a partial recovery or reinvestment after a period of contraction.
- Cash-Flow-Statement-Based Aggregate Accruals
- The aggregate accruals show significant volatility. The value starts positive at about 5.2 billion US dollars in 2021, sharply decreases to nearly zero in 2022, and then turns substantially negative in the subsequent years, reaching -27.4 billion in 2024 before improving slightly to -14.7 billion in 2025. This sharp drop into negative territory indicates increasing adjustments that may be reflecting a growing divergence between accounting earnings and actual cash flows, which could be a sign of decreased earnings quality or more conservative cash flow recognition.
- Cash-Flow-Statement-Based Accruals Ratio
- The accruals ratio, expressed as a percentage, mirrors the aggregate accruals’ pattern. It begins positively at nearly 4.9% in 2021, falls to zero in 2022, and then shifts to significant negative values in 2023 and 2024, reaching a low of approximately -26%. By 2025, the ratio improves somewhat to about -13.4% but remains negative. This negative ratio suggests increasing reliance on non-cash components within earnings reporting, typically interpreted as a reduction in reporting quality or an increase in earnings volatility relative to cash flows.
Overall, the data suggests that over the five-year span, the company experienced a decline in net operating assets, coupled with an increasing negative accrual component, which may raise concerns regarding cash flow quality and earnings sustainability. The partial recovery in net operating assets and the improvement in the accruals ratio in the final period indicates some stabilization, yet the negative values in those years highlight ongoing challenges in financial reporting quality.