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
Intuit Inc., balance sheet computation of aggregate accruals
US$ in millions
| Jul 31, 2025 | Jul 31, 2024 | Jul 31, 2023 | Jul 31, 2022 | Jul 31, 2021 | Jul 31, 2020 | ||
|---|---|---|---|---|---|---|---|
| Operating Assets | |||||||
| Total assets | 36,958) | 32,132) | 27,780) | 27,734) | 15,516) | 10,931) | |
| Less: Cash and cash equivalents | 2,884) | 3,609) | 2,848) | 2,796) | 2,562) | 6,442) | |
| Less: Investments | 1,668) | 465) | 814) | 485) | 1,308) | 608) | |
| Operating assets | 32,406) | 28,058) | 24,118) | 24,453) | 11,646) | 3,881) | |
| Operating Liabilities | |||||||
| Total liabilities | 17,248) | 13,696) | 10,511) | 11,293) | 5,647) | 5,825) | |
| Less: Short-term debt | —) | 499) | —) | 499) | —) | 1,338) | |
| Less: Long-term debt | 5,973) | 5,539) | 6,120) | 6,415) | 2,034) | 2,031) | |
| Operating liabilities | 11,275) | 7,658) | 4,391) | 4,379) | 3,613) | 2,456) | |
| Net operating assets1 | 21,131) | 20,400) | 19,727) | 20,074) | 8,033) | 1,425) | |
| Balance-sheet-based aggregate accruals2 | 731) | 673) | (347) | 12,041) | 6,608) | —) | |
| Financial Ratio | |||||||
| Balance-sheet-based accruals ratio3 | 3.52% | 3.35% | -1.74% | 85.68% | 139.73% | — | |
| Benchmarks | |||||||
| Balance-Sheet-Based Accruals Ratio, Competitors4 | |||||||
| Accenture PLC | — | 35.69% | 16.32% | 21.70% | 27.93% | 3.73% | |
| Adobe Inc. | — | -3.83% | 1.85% | -8.24% | 14.14% | 8.20% | |
| Cadence Design Systems Inc. | — | 39.84% | 11.17% | 26.65% | 4.43% | — | |
| CrowdStrike Holdings Inc. | — | — | — | — | — | — | |
| Datadog Inc. | — | -28.51% | -35.73% | 17.56% | 173.39% | — | |
| Fair Isaac Corp. | — | 6.46% | 12.11% | -3.66% | -6.17% | -0.02% | |
| International Business Machines Corp. | — | 2.79% | 2.42% | 1.55% | -7.39% | — | |
| Microsoft Corp. | 21.81% | 52.18% | 22.96% | 42.27% | 40.52% | — | |
| Oracle Corp. | 20.79% | 4.30% | 51.77% | 9.90% | 5.62% | — | |
| Palantir Technologies Inc. | — | — | — | — | — | — | |
| Palo Alto Networks Inc. | 32.24% | 89.91% | 137.01% | -124.73% | 85.21% | — | |
| Salesforce Inc. | 0.71% | -2.46% | -2.30% | 57.74% | 10.87% | — | |
| ServiceNow Inc. | — | 22.91% | 61.79% | 12.89% | 34.89% | — | |
| Synopsys Inc. | — | 7.85% | 13.85% | 5.01% | 0.36% | 8.40% | |
| Workday Inc. | 20.74% | 28.44% | -11.24% | 55.93% | -15.99% | — | |
| Balance-Sheet-Based Accruals Ratio, Sector | |||||||
| Software & Services | 0.00% | 26.34% | 18.45% | 29.41% | 16.74% | — | |
| Balance-Sheet-Based Accruals Ratio, Industry | |||||||
| Information Technology | 0.00% | 21.41% | 8.97% | 18.09% | 19.19% | — | |
Based on: 10-K (reporting date: 2025-07-31), 10-K (reporting date: 2024-07-31), 10-K (reporting date: 2023-07-31), 10-K (reporting date: 2022-07-31), 10-K (reporting date: 2021-07-31), 10-K (reporting date: 2020-07-31).
1 2025 Calculation
Net operating assets = Operating assets – Operating liabilities
= 32,406 – 11,275 = 21,131
2 2025 Calculation
Balance-sheet-based aggregate accruals = Net operating assets2025 – Net operating assets2024
= 21,131 – 20,400 = 731
3 2025 Calculation
Balance-sheet-based accruals ratio = 100 × Balance-sheet-based aggregate accruals ÷ Avg. net operating assets
= 100 × 731 ÷ [(21,131 + 20,400) ÷ 2] = 3.52%
4 Click competitor name to see calculations.
The data reveals notable trends in the financial reporting quality over the five-year period analyzed. There is an overall increase in net operating assets, which nearly triples from 8,033 million US dollars in 2021 to 21,131 million US dollars in 2025. This steady growth suggests an expansion in the company's asset base utilized in operations.
In terms of balance-sheet-based aggregate accruals, a distinct pattern emerges. The value rises significantly from 6,608 million US dollars in 2021 to 12,041 million US dollars in 2022, indicating a substantial increase in accruals. However, in 2023, there is a dramatic reversal where accruals become negative, reaching -347 million US dollars. This shift points to a considerable change in the company's accrual accounting practices or the business cycle affecting accrual components. In the subsequent years, 2024 and 2025, the accruals return to positive territory but remain marginal at 673 million and 731 million US dollars respectively, indicating stabilization but at much lower levels than earlier years.
The balance-sheet-based accruals ratio, expressed as a percentage of net operating assets, mirrors this volatility. Starting at an extremely high level of 139.73% in 2021, it declines markedly to 85.68% in 2022, followed by a sharp reduction to -1.74% in 2023. This negative ratio reflects the negative aggregate accruals observed that year. The ratio then increases slightly to 3.35% in 2024 and 3.52% in 2025, suggesting a move towards normalized accrual levels relative to net operating assets.
Collectively, the trends indicate significant fluctuations in accrual measures during the early part of the period studied, with a return to more moderate and stable accrual ratios in the later years. The progressive increase in net operating assets alongside the normalization of accrual ratios may signal an improvement in the quality of financial reporting or changes in operational dynamics influencing accrual accounting.
Cash-Flow-Statement-Based Accruals Ratio
Intuit Inc., cash flow statement computation of aggregate accruals
US$ in millions
| Jul 31, 2025 | Jul 31, 2024 | Jul 31, 2023 | Jul 31, 2022 | Jul 31, 2021 | Jul 31, 2020 | ||
|---|---|---|---|---|---|---|---|
| Net income | 3,869) | 2,963) | 2,384) | 2,066) | 2,062) | 1,826) | |
| Less: Net cash provided by operating activities | 6,207) | 4,884) | 5,046) | 3,889) | 3,250) | 2,414) | |
| Less: Net cash used in investing activities | (2,318) | (227) | (922) | (5,421) | (3,965) | (97) | |
| Cash-flow-statement-based aggregate accruals | (20) | (1,694) | (1,740) | 3,598) | 2,777) | (491) | |
| Financial Ratio | |||||||
| Cash-flow-statement-based accruals ratio1 | -0.10% | -8.44% | -8.74% | 25.60% | 58.72% | — | |
| Benchmarks | |||||||
| Cash-Flow-Statement-Based Accruals Ratio, Competitors2 | |||||||
| Accenture PLC | — | 24.31% | -0.19% | 11.87% | 11.80% | -13.65% | |
| Adobe Inc. | — | -21.90% | -21.73% | -19.93% | 9.21% | -0.48% | |
| Cadence Design Systems Inc. | — | 17.36% | 3.78% | 15.03% | -5.75% | — | |
| CrowdStrike Holdings Inc. | — | — | — | — | — | — | |
| Datadog Inc. | — | 30.92% | 53.36% | -34.44% | -28.18% | — | |
| Fair Isaac Corp. | — | -8.60% | -2.41% | -13.92% | -17.25% | -10.25% | |
| International Business Machines Corp. | — | -3.73% | 0.99% | -7.22% | -1.64% | — | |
| Microsoft Corp. | 12.55% | 30.89% | 5.22% | 13.42% | 17.68% | — | |
| Oracle Corp. | 13.98% | -1.01% | 42.79% | -30.58% | 25.81% | — | |
| Palantir Technologies Inc. | — | — | — | — | — | — | |
| Palo Alto Networks Inc. | -8.91% | 33.84% | -37.95% | -196.64% | -68.30% | — | |
| Salesforce Inc. | -6.66% | -8.44% | -8.49% | 21.96% | 10.57% | — | |
| ServiceNow Inc. | — | -7.12% | 15.44% | 8.80% | -21.14% | — | |
| Synopsys Inc. | — | -7.64% | 0.20% | -4.64% | -4.88% | 0.92% | |
| Workday Inc. | -4.25% | 34.56% | 18.64% | -0.65% | -18.51% | — | |
| Cash-Flow-Statement-Based Accruals Ratio, Sector | |||||||
| Software & Services | 0.00% | 12.10% | 7.40% | 1.94% | 11.13% | — | |
| Cash-Flow-Statement-Based Accruals Ratio, Industry | |||||||
| Information Technology | 0.00% | 6.30% | 1.47% | 2.90% | 8.62% | — | |
Based on: 10-K (reporting date: 2025-07-31), 10-K (reporting date: 2024-07-31), 10-K (reporting date: 2023-07-31), 10-K (reporting date: 2022-07-31), 10-K (reporting date: 2021-07-31), 10-K (reporting date: 2020-07-31).
1 2025 Calculation
Cash-flow-statement-based accruals ratio = 100 × Cash-flow-statement-based aggregate accruals ÷ Avg. net operating assets
= 100 × -20 ÷ [(21,131 + 20,400) ÷ 2] = -0.10%
2 Click competitor name to see calculations.
- Net Operating Assets
- The net operating assets demonstrate a significant increase from 8,033 million USD in 2021 to 20,074 million USD in 2022. Following this sharp rise, the values remain relatively stable, with minor fluctuations: 19,727 million USD in 2023, 20,400 million USD in 2024, and 21,131 million USD in 2025. This pattern reflects a substantial expansion of operating asset base in the early period, followed by a stabilization phase.
- Cash-flow-statement-based Aggregate Accruals
- The aggregate accruals exhibit a decreasing trend over the analyzed periods. In 2021 and 2022, the values are positive, amounting to 2,777 million USD and 3,598 million USD respectively, indicating accruals contributing positively to operating cash flow. However, from 2023 onwards, the figures turn negative with -1,740 million USD in 2023 and remaining negative but gradually approaching zero in 2024 (-1,694 million USD) and 2025 (-20 million USD). This shift from positive to negative accruals suggests a change in the quality or nature of earnings relative to cash flows.
- Cash-flow-statement-based Accruals Ratio
- The accruals ratio decreases sharply over the period. Starting at 58.72% in 2021, it falls to 25.6% in 2022, indicating a considerable reduction in the proportion of accruals relative to cash flows. In subsequent years, the ratio becomes negative (-8.74% in 2023, -8.44% in 2024), nearing zero in 2025 (-0.1%). This shift from a high positive ratio to a negative and nearly neutral ratio implies an improvement in earnings quality as accruals subside and cash flow components dominate.