Microsoft Excel LibreOffice Calc

Gilead Sciences Inc. (GILD)


Financial Reporting Quality: Aggregate Accruals

High level of difficulty

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

Gilead Sciences Inc., balance sheet computation of aggregate accruals

US$ in millions

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Operating Assets
Total assets 63,675  70,283  56,977  51,839  34,664 
Less: Cash and cash equivalents 17,940  7,588  8,229  12,851  10,027 
Less: Short-term marketable securities 12,149  17,922  3,666  1,756  101 
Operating assets 33,586  44,773  45,082  37,232  24,536 
Operating Liabilities
Total liabilities 42,141  49,782  37,614  32,724  18,830 
Less: Current portion of long-term debt and other obligations, net 2,748  2,747  —  983  483 
Less: Long-term debt, net, excluding current portion 24,574  30,795  26,346  21,195  11,921 
Operating liabilities 14,819  16,240  11,268  10,546  6,426 
Net operating assets1 18,767  28,533  33,814  26,686  18,110 
Balance-sheet-based aggregate accruals2 (9,766) (5,281) 7,128  8,576 
Ratio
Balance-sheet-based accruals ratio3 -41.29% -16.94% 23.56% 38.29%
Benchmarks
Balance-Sheet-Based Accruals Ratio, Competitors4
Abbott Laboratories -6.71% 69.42% -1.06% -3.34%
AbbVie Inc. -31.42% -7.02% 25.20% 105.82%
Allergan PLC -11.32% 1.78% -21.00% 92.17%
Amgen Inc. -9.88% -33.04% -6.85% -4.19%
Biogen Inc. 3.85% 7.67% 9.75% 26.50%
Bristol-Myers Squibb Co. -3.17% -24.97% -0.82% 9.08%
Celgene Corp. 62.19% -18.63% -5.27% 79.80%
Eli Lilly & Co. -10.27% -5.99% 1.26% -2.72%
Johnson & Johnson -8.03% 31.51% 5.55% -5.16%
Merck & Co. Inc. -15.70% -0.65% -12.97% 6.02%
Pfizer Inc. -9.34% 12.36% 4.12% 11.13%
Regeneron Pharmaceuticals Inc. 20.14% 33.15% 26.37% 34.77%
Balance-Sheet-Based Accruals Ratio, Sector
Pharmaceuticals & Biotechnology -9.53% 8.00% -1.83% 29.02%
Balance-Sheet-Based Accruals Ratio, Industry
Health Care -1.89% 7.94% 0.81% 35.33%

Based on: 10-K (filing date: 2019-02-26), 10-K (filing date: 2018-02-27), 10-K (filing date: 2017-02-27), 10-K (filing date: 2016-02-24), 10-K (filing date: 2015-02-25).

1 2018 Calculation
Net operating assets = Operating assets – Operating liabilities
= 33,58614,819 = 18,767

2 2018 Calculation
Balance-sheet-based aggregate accruals = Net operating assets 2018 – Net operating assets 2017
= 18,76728,533 = -9,766

3 2018 Calculation
Balance-sheet-based accruals ratio = 100 × Balance-sheet-based aggregate accruals ÷ Avg. net operating assets
= 100 × -9,766 ÷ [(18,767 + 28,533) ÷ 2] = -41.29%

4 Click competitor name to see calculations.

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, Gilead Sciences Inc. deteriorated earnings quality from 2017 to 2018.

Cash-Flow-Statement-Based Accruals Ratio

Gilead Sciences Inc., cash flow statement computation of aggregate accruals

US$ in millions

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Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Net income attributable to Gilead 5,455  4,628  13,501  18,108  12,101 
Less: Net cash provided by operating activities 8,400  11,898  16,669  20,329  12,818 
Less: Net cash (used in) provided by investing activities 14,355  (16,069) (11,985) (12,475) (1,823)
Cash-flow-statement-based aggregate accruals (17,300) 8,799  8,817  10,254  1,106 
Ratio
Cash-flow-statement-based accruals ratio1 -73.15% 28.23% 29.15% 45.78%
Benchmarks
Cash-Flow-Statement-Based Accruals Ratio, Competitors2
Abbott Laboratories -5.39% 12.34% -6.46% 4.27%
AbbVie Inc. -23.85% -12.92% 16.02% 59.26%
Allergan PLC -15.00% -9.44% -10.08% 45.11%
Amgen Inc. -95.70% -22.85% 22.06% 11.81%
Biogen Inc. 1.91% 6.65% 12.70% 39.81%
Bristol-Myers Squibb Co. -1.14% -28.29% 0.76% 8.10%
Celgene Corp. 34.03% 4.95% -7.35% 55.24%
Eli Lilly & Co. -25.54% -11.43% 5.63% -2.13%
Johnson & Johnson -5.08% -7.40% 4.68% 7.15%
Merck & Co. Inc. -19.26% -13.29% -5.97% -5.73%
Pfizer Inc. -10.12% 10.69% -1.06% -5.98%
Regeneron Pharmaceuticals Inc. 28.32% 19.22% 13.64% 8.37%
Cash-Flow-Statement-Based Accruals Ratio, Sector
Pharmaceuticals & Biotechnology -15.74% -2.28% 1.73% 16.40%
Cash-Flow-Statement-Based Accruals Ratio, Industry
Health Care -8.00% -0.19% 2.89% 18.47%

Based on: 10-K (filing date: 2019-02-26), 10-K (filing date: 2018-02-27), 10-K (filing date: 2017-02-27), 10-K (filing date: 2016-02-24), 10-K (filing date: 2015-02-25).

1 2018 Calculation
Cash-flow-statement-based accruals ratio = 100 × Cash-flow-statement-based aggregate accruals ÷ Avg. net operating assets
= 100 × -17,300 ÷ [(18,767 + 28,533) ÷ 2] = -73.15%

2 Click competitor name to see calculations.

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, Gilead Sciences Inc. deteriorated earnings quality from 2017 to 2018.