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
DoorDash, Inc., balance sheet computation of aggregate accruals
US$ in millions
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Operating Assets | ||||||
| Total assets | 12,845) | 10,839) | 9,789) | 6,809) | 6,353) | |
| Less: Cash and cash equivalents | 4,019) | 2,656) | 1,977) | 2,504) | 4,345) | |
| Less: Restricted cash | 190) | 105) | —) | —) | —) | |
| Less: Short-term marketable securities | 1,322) | 1,422) | 1,544) | 1,253) | 514) | |
| Operating assets | 7,314) | 6,656) | 6,268) | 3,052) | 1,494) | |
| Operating Liabilities | ||||||
| Total liabilities | 5,035) | 4,026) | 3,021) | 2,142) | 1,653) | |
| Less: Convertible notes | —) | —) | —) | —) | 364) | |
| Operating liabilities | 5,035) | 4,026) | 3,021) | 2,142) | 1,289) | |
| Net operating assets1 | 2,279) | 2,630) | 3,247) | 910) | 205) | |
| Balance-sheet-based aggregate accruals2 | (351) | (617) | 2,337) | 705) | —) | |
| Financial Ratio | ||||||
| Balance-sheet-based accruals ratio3 | -14.30% | -21.00% | 112.44% | 126.46% | — | |
| Benchmarks | ||||||
| Balance-Sheet-Based Accruals Ratio, Competitors4 | ||||||
| Airbnb Inc. | — | — | — | — | — | |
| Booking Holdings Inc. | — | -468.72% | -68.38% | 2.00% | — | |
| Chipotle Mexican Grill Inc. | 23.30% | 18.41% | 18.43% | 13.32% | — | |
| McDonald’s Corp. | 11.01% | 9.94% | 8.46% | 0.56% | — | |
| Starbucks Corp. | 28.92% | 13.66% | 10.72% | -25.79% | 45.93% | |
| Balance-Sheet-Based Accruals Ratio, Sector | ||||||
| Consumer Services | 5.80% | 3.11% | 4.58% | 1.21% | — | |
| Balance-Sheet-Based Accruals Ratio, Industry | ||||||
| Consumer Discretionary | 12.07% | 12.01% | 13.04% | 12.78% | — | |
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 2024 Calculation
Net operating assets = Operating assets – Operating liabilities
= 7,314 – 5,035 = 2,279
2 2024 Calculation
Balance-sheet-based aggregate accruals = Net operating assets2024 – Net operating assets2023
= 2,279 – 2,630 = -351
3 2024 Calculation
Balance-sheet-based accruals ratio = 100 × Balance-sheet-based aggregate accruals ÷ Avg. net operating assets
= 100 × -351 ÷ [(2,279 + 2,630) ÷ 2] = -14.30%
4 Click competitor name to see calculations.
- Net operating assets
- The net operating assets showed a significant increase from US$910 million in 2021 to US$3,247 million in 2022, indicating substantial growth. However, this figure declined in the following years, decreasing to US$2,630 million in 2023 and further down to US$2,279 million in 2024. This pattern suggests an initial expansion followed by a contraction in net operating assets over the four-year period.
- Balance-sheet-based aggregate accruals
- The balance-sheet-based aggregate accruals rose sharply from US$705 million in 2021 to US$2,337 million in 2022, mirroring the increase in net operating assets. However, the accruals then shifted to negative values in the subsequent years, recording -US$617 million in 2023 and -US$351 million in 2024. This reversal indicates a significant change in the accounting accruals, potentially reflecting changes in asset valuation or operational adjustments.
- Balance-sheet-based accruals ratio
- The accruals ratio, expressed as a percentage, was above 100% in both 2021 (126.46%) and 2022 (112.44%), which may indicate high levels of accruals relative to net operating assets. This ratio sharply declined to negative values in 2023 (-21%) and 2024 (-14.3%), consistent with the negative aggregate accruals. The negative ratios suggest reduced accruals or reversals, which could reflect improved earnings quality or a shift in accounting practices.
Cash-Flow-Statement-Based Accruals Ratio
DoorDash, Inc., cash flow statement computation of aggregate accruals
US$ in millions
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Net income (loss) attributable to DoorDash, Inc. common stockholders | 123) | (558) | (1,365) | (468) | (461) | |
| Less: Net cash provided by operating activities | 2,132) | 1,673) | 367) | 692) | 252) | |
| Less: Net cash used in investing activities | (444) | (342) | (300) | (2,047) | (192) | |
| Cash-flow-statement-based aggregate accruals | (1,565) | (1,889) | (1,432) | 887) | (521) | |
| Financial Ratio | ||||||
| Cash-flow-statement-based accruals ratio1 | -63.76% | -64.28% | -68.90% | 159.10% | — | |
| Benchmarks | ||||||
| Cash-Flow-Statement-Based Accruals Ratio, Competitors2 | ||||||
| Airbnb Inc. | — | — | — | — | — | |
| Booking Holdings Inc. | — | -519.27% | -67.03% | -11.13% | — | |
| Chipotle Mexican Grill Inc. | 13.33% | 24.18% | 30.18% | -9.35% | — | |
| McDonald’s Corp. | 12.31% | 6.77% | 5.35% | 2.17% | — | |
| Starbucks Corp. | 9.10% | 12.06% | 36.35% | -47.73% | 36.84% | |
| Cash-Flow-Statement-Based Accruals Ratio, Sector | ||||||
| Consumer Services | -1.61% | -4.40% | -8.29% | -5.57% | — | |
| Cash-Flow-Statement-Based Accruals Ratio, Industry | ||||||
| Consumer Discretionary | 9.43% | 4.25% | 1.57% | 11.50% | — | |
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 2024 Calculation
Cash-flow-statement-based accruals ratio = 100 × Cash-flow-statement-based aggregate accruals ÷ Avg. net operating assets
= 100 × -1,565 ÷ [(2,279 + 2,630) ÷ 2] = -63.76%
2 Click competitor name to see calculations.
- Net Operating Assets
- The net operating assets exhibit a significant increase from 910 million US dollars at the end of 2021 to 3247 million in 2022. After reaching this peak, there is a decline observed over the following two years, falling to 2630 million in 2023 and further to 2279 million in 2024. This indicates a period of rapid asset growth followed by a retrenchment phase.
- Cash-flow-statement-based Aggregate Accruals
- Aggregate accruals were positive at 887 million US dollars at the end of 2021, suggesting that operating cash flows exceeded net income adjusted for non-cash items in that period. However, from 2022 onwards, accruals turn negative and continue to decrease, reaching -1432 million in 2022 and further declining to -1889 million in 2023 and -1565 million in 2024. This trend implies increasing deviations that may reflect changes in the timing of revenue and expense recognition or operational cash flow challenges.
- Cash-flow-statement-based Accruals Ratio
- The accruals ratio shows a high positive value of 159.1% in 2021, indicating a disproportionately high level of accruals relative to cash flows in that year. In 2022, the ratio sharply turns negative to -68.9% and remains consistently negative at approximately -64% in 2023 and 2024. Such large negative ratios suggest persistent and substantial negative accruals, highlighting potential concerns regarding the quality and sustainability of earnings from a cash flow perspective during these years.
Overall, the data shows an initial expansion in net operating assets in 2022, followed by a contraction period, coupled with a shift from positive to significantly negative cash flow-based accruals. The sustained negative accruals ratio after 2021 points to noteworthy changes in the accounting or cash flow dynamics that warrant closer examination to understand their implications on the financial health and reporting quality.