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.
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- Statement of Comprehensive Income
- Analysis of Liquidity Ratios
- Dividend Discount Model (DDM)
- Operating Profit Margin since 2005
- Return on Assets (ROA) since 2005
- Current Ratio since 2005
- Debt to Equity since 2005
- Total Asset Turnover since 2005
- Price to Earnings (P/E) since 2005
- Analysis of Revenues
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Balance-Sheet-Based Accruals Ratio
Intuitive Surgical Inc., balance sheet computation of aggregate accruals
US$ in thousands
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Operating Assets | ||||||
| Total assets | ||||||
| Less: Cash and cash equivalents | ||||||
| Less: Short-term investments | ||||||
| Operating assets | ||||||
| Operating Liabilities | ||||||
| Total liabilities | ||||||
| Operating liabilities | ||||||
| Net operating assets1 | ||||||
| Balance-sheet-based aggregate accruals2 | ||||||
| Financial Ratio | ||||||
| Balance-sheet-based accruals ratio3 | ||||||
| Benchmarks | ||||||
| Balance-Sheet-Based Accruals Ratio, Competitors4 | ||||||
| Abbott Laboratories | ||||||
| CVS Health Corp. | ||||||
| Elevance Health Inc. | ||||||
| Medtronic PLC | ||||||
| UnitedHealth Group Inc. | ||||||
| Balance-Sheet-Based Accruals Ratio, Sector | ||||||
| Health Care Equipment & Services | ||||||
| Balance-Sheet-Based Accruals Ratio, Industry | ||||||
| Health Care | ||||||
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
= – =
2 2024 Calculation
Balance-sheet-based aggregate accruals = Net operating assets2024 – Net operating assets2023
= – =
3 2024 Calculation
Balance-sheet-based accruals ratio = 100 × Balance-sheet-based aggregate accruals ÷ Avg. net operating assets
= 100 × ÷ [( + ) ÷ 2] =
4 Click competitor name to see calculations.
The data shows the annual values for net operating assets, balance-sheet-based aggregate accruals, and the balance-sheet-based accruals ratio over four consecutive years ending December 31 from 2021 through 2024.
- Net Operating Assets
- There is a fluctuating trend observed in the net operating assets. The value decreased from approximately 7.75 billion USD in 2021 to about 6.99 billion USD in 2022. This was followed by an increase to approximately 8.17 billion USD in 2023, and a more pronounced rise to around 12.52 billion USD in 2024. The significant increase in 2024 suggests a substantial expansion in the company's operating asset base in that year.
- Balance-Sheet-Based Aggregate Accruals
- The aggregate accruals exhibit considerable volatility during the period. Starting at nearly 3.10 billion USD in 2021, the figure turned negative to approximately -753 million USD in 2022, indicating a reversal or reduction in accruals for that year. It then rose again to 1.18 billion USD in 2023 and sharply increased to 4.34 billion USD in 2024. This pattern suggests fluctuating accrual accounting adjustments, with a notable surge in 2024.
- Balance-Sheet-Based Accruals Ratio
- This ratio mirrors the movements in aggregate accruals but is presented as a percentage relative to net operating assets. In 2021, the ratio was substantially high at 50.02%. It decreased sharply to a negative value of -10.21% in 2022, indicating the presence of negative accruals relative to operating assets. The ratio then recovered to a positive 15.55% in 2023 and increased again to 41.97% in 2024. The elevated ratios in 2021 and 2024 imply considerable accrual contributions relative to the asset base, whereas the negative ratio in 2022 reflects unusual accrual activity during that year.
Cash-Flow-Statement-Based Accruals Ratio
Intuitive Surgical Inc., cash flow statement computation of aggregate accruals
US$ in thousands
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Net income attributable to Intuitive Surgical, Inc. | ||||||
| Less: Net cash provided by operating activities | ||||||
| Less: Net cash (used in) provided by investing activities | ||||||
| Cash-flow-statement-based aggregate accruals | ||||||
| Financial Ratio | ||||||
| Cash-flow-statement-based accruals ratio1 | ||||||
| Benchmarks | ||||||
| Cash-Flow-Statement-Based Accruals Ratio, Competitors2 | ||||||
| Abbott Laboratories | ||||||
| CVS Health Corp. | ||||||
| Elevance Health Inc. | ||||||
| Medtronic PLC | ||||||
| UnitedHealth Group Inc. | ||||||
| Cash-Flow-Statement-Based Accruals Ratio, Sector | ||||||
| Health Care Equipment & Services | ||||||
| Cash-Flow-Statement-Based Accruals Ratio, Industry | ||||||
| Health Care | ||||||
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 × ÷ [( + ) ÷ 2] =
2 Click competitor name to see calculations.
- Net Operating Assets
- There is a general upward trend in net operating assets over the four-year period. Starting at 7,747,500 thousand US dollars in 2021, the figure dipped to 6,994,700 thousand US dollars in 2022. However, it rebounded in 2023 to 8,174,100 thousand US dollars and then experienced a significant increase in 2024, reaching 12,516,300 thousand US dollars. This indicates a substantial growth in the asset base, particularly marking strong expansion in the latest year.
- Cash-flow-statement-based Aggregate Accruals
- This metric shows considerable volatility across the years. It was positive at 2,076,700 thousand US dollars in 2021, turned negative to -1,539,300 thousand US dollars in 2022, then reverted to a positive 344,300 thousand US dollars in 2023, and rose sharply to 3,180,400 thousand US dollars in 2024. The fluctuations suggest variability in the net accruals component, with a notable recovery and strengthening accrual position in 2024.
- Cash-flow-statement-based Accruals Ratio
- The accruals ratio similarly reflects significant variation over the analyzed period. It was relatively high at 33.51% in 2021, dropped to a negative value of -20.88% in 2022, which indicates a reversal in the relationship between accruals and net operating assets. The ratio then climbed back to a modest positive 4.54% in 2023 and increased further to 30.74% in 2024. These movements correspond with the changes observed in aggregate accruals and net operating assets, showing a fluctuating but improving accrual quality ratio by the end of the period.