NVIDIA Corp. (NASDAQ:NVDA)

The analysis of the annual financial reporting quality measures reveals several notable trends over the five-year period ending in January 2025.

Net Operating Assets

There is a consistent upward trend in net operating assets, increasing significantly from US$12,295 million in 2021 to US$44,580 million in 2025. This growth represents more than a threefold increase over the period, indicating substantial expansion in the company’s operating asset base, which may suggest increased operational capacity or investment in productive assets.

Balance-sheet-based Aggregate Accruals

The aggregate accruals started at US$8,997 million in 2021, followed by a sharp decline to US$4,055 million in 2022 and US$3,408 million in 2023. However, this trend reversed in 2024, with accruals nearly doubling to US$6,945 million, and then more than doubling again to US$17,877 million in 2025. This pattern reflects considerable volatility in accrual levels, with a notable resurgence in recent periods, potentially indicating changes in earnings management or accounting estimates.

Balance-sheet-based Accruals Ratio

The accruals ratio, expressed as a percentage of net operating assets, shows a significant decline from 115.4% in 2021 to 18.88% in 2023, corresponding with the reduction in aggregate accruals and the increase in net operating assets. However, from 2023 onwards, this ratio rises again to 29.9% in 2024 and then to 50.16% in 2025. Despite being considerably lower than the initial 2021 figure, the recent increase in the ratio suggests growing accruals relative to operating assets, which may warrant increased scrutiny as it could impact the quality of earnings.

In summary, while the underlying operating asset base demonstrated strong growth throughout the period, the accrual-related measures exhibit considerable fluctuations. The initial reduction in accruals and accrual ratio may have indicated improved earnings quality, but the resurgence in later years suggests a potential shift that should be monitored for implications on financial reporting reliability and earnings sustainability.

Net Operating Assets

The net operating assets exhibit a steady and significant increase over the five-year period. Starting at US$12,295 million in January 2021, the figure rises progressively to US$44,580 million by January 2025. This upward trend suggests substantial growth in the company's operating asset base, indicating possible expansion or increased investment in operational resources.

Cash-flow-statement-based Aggregate Accruals

Aggregate accruals display considerable volatility during the observed years. Initially, the value is positive at US$18,185 million in January 2021, decreases notably to US$10,474 million in January 2022, and then turns negative to -US$8,648 million in January 2023. Subsequently, the figure rebounds to positive values, reaching US$12,236 million and US$29,212 million in January 2024 and January 2025 respectively. The fluctuation points to inconsistent accruals behavior, with a notable dip into negative territory in 2023, which could reflect abnormal adjustments or operational irregularities for that year.

Cash-flow-statement-based Accruals Ratio

The accruals ratio mirrors the variability seen in aggregate accruals, indicating marked shifts in the proportion of accruals relative to cash flows. It begins at a high 233.25% in January 2021, declines sharply to 73.13% by January 2022, and turns negative to -47.9% in January 2023. Thereafter, the ratio recovers to 52.67% and 81.96% in the subsequent two years. The negative ratio in 2023 suggests that cash flows may have exceeded accruals, implying a possible divergence from normal accrual patterns and potential implications for earnings quality or timing of revenue and expense recognition during that period.