Stock Analysis on Net
Stock Analysis on Net

Qualcomm Inc. (NASDAQ:QCOM)

$24.99

Financial Reporting Quality: Aggregate Accruals

Microsoft Excel

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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Balance-Sheet-Based Accruals Ratio

Qualcomm Inc., balance sheet computation of aggregate accruals

US$ in millions

Microsoft Excel
Sep 29, 2024 Sep 24, 2023 Sep 25, 2022 Sep 26, 2021 Sep 27, 2020 Sep 29, 2019
Operating Assets
Total assets
Less: Cash and cash equivalents
Less: Marketable securities
Operating assets
Operating Liabilities
Total liabilities
Less: Short-term debt
Less: Long-term debt
Operating liabilities
 
Net operating assets1
Balance-sheet-based aggregate accruals2
Financial Ratio
Balance-sheet-based accruals ratio3
Benchmarks
Balance-Sheet-Based Accruals Ratio, Competitors4
Advanced Micro Devices Inc.
Analog Devices Inc.
Applied Materials Inc.
Broadcom Inc.
Intel Corp.
KLA Corp.
Lam Research Corp.
Micron Technology Inc.
NVIDIA Corp.
Texas Instruments Inc.
Balance-Sheet-Based Accruals Ratio, Sector
Semiconductors & Semiconductor Equipment
Balance-Sheet-Based Accruals Ratio, Industry
Information Technology

Based on: 10-K (reporting date: 2024-09-29), 10-K (reporting date: 2023-09-24), 10-K (reporting date: 2022-09-25), 10-K (reporting date: 2021-09-26), 10-K (reporting date: 2020-09-27), 10-K (reporting date: 2019-09-29).

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.

Net Operating Assets
Over the five-year period, net operating assets demonstrated an overall increasing trend. Starting at 10,589 million US dollars in 2020, there was a notable increase in 2021 to 13,281 million US dollars. The value then surged substantially in 2022, reaching 27,113 million US dollars. This level slightly declined during 2023 to 25,655 million US dollars before rising again in 2024 to 27,608 million US dollars. This pattern indicates an expansion in operating resources employed by the company, with a peak in 2022, a minor contraction in 2023, and recovery in 2024.
Balance-Sheet-Based Aggregate Accruals
The aggregate accruals exhibited considerable volatility across the analyzed periods. Initially, accruals grew from 2,007 million in 2020 to 2,692 million in 2021. A significant surge was observed in 2022, where accruals reached 13,832 million, marking a substantial rise that aligns with the increase in net operating assets for the same year. However, in 2023, the accruals sharply reversed to a negative figure of -1,458 million, indicating a considerable reversal or reduction in accruals. This negative value was followed by a return to a modest positive level of 1,953 million in 2024. The fluctuation highlights potential variability in earnings quality or changes in accounting estimates and judgments.
Balance-Sheet-Based Accruals Ratio
The accruals ratio, which measures balance-sheet-based aggregate accruals as a percentage of net operating assets, mirrored the volatile pattern of aggregate accruals. The ratio started at 20.94% in 2020 and showed a gradual increase to 22.56% in 2021. A sharp spike occurred in 2022, with the ratio peaking at 68.49%, substantially higher than previous years, which may indicate an increased level of accrual adjustments relative to net operating assets. In 2023, the ratio turned negative to -5.53%, consistent with the negative accrual figure reported that year, suggesting an unusual reversal in accruals. In 2024, the ratio normalized somewhat to 7.33%, indicating a return toward typical accrual behavior but still below earlier levels seen in 2020 and 2021.
Insights and Implications
The data reveals pronounced volatility in balance-sheet-based aggregate accruals and their ratio relative to net operating assets, particularly in 2022 and 2023. The substantial increase in net operating assets and accruals in 2022 coupled with a subsequent negative reversal in 2023 could signify an anomalous year or the impact of distinct transactions affecting accrual estimates. The normalization observed in 2024 suggests a reversion toward more stable accrual levels. Such fluctuations in accrual measures could affect the reliability of earnings and signal varying degrees of financial reporting quality over the examined timeframe.

Cash-Flow-Statement-Based Accruals Ratio

Qualcomm Inc., cash flow statement computation of aggregate accruals

US$ in millions

Microsoft Excel
Sep 29, 2024 Sep 24, 2023 Sep 25, 2022 Sep 26, 2021 Sep 27, 2020 Sep 29, 2019
Net income
Less: Net cash provided by operating activities
Less: Net cash used 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
Advanced Micro Devices Inc.
Analog Devices Inc.
Applied Materials Inc.
Broadcom Inc.
Intel Corp.
KLA Corp.
Lam Research Corp.
Micron Technology Inc.
NVIDIA Corp.
Texas Instruments Inc.
Cash-Flow-Statement-Based Accruals Ratio, Sector
Semiconductors & Semiconductor Equipment
Cash-Flow-Statement-Based Accruals Ratio, Industry
Information Technology

Based on: 10-K (reporting date: 2024-09-29), 10-K (reporting date: 2023-09-24), 10-K (reporting date: 2022-09-25), 10-K (reporting date: 2021-09-26), 10-K (reporting date: 2020-09-27), 10-K (reporting date: 2019-09-29).

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
The net operating assets demonstrate a consistent upward trajectory from 2020 to 2024. Starting at $10,589 million in 2020, the figure increases significantly to $27,608 million by 2024. Notably, there is a sharp rise from 2021 to 2022, followed by a slight decline in 2023, which is then reversed with an increase in 2024.
Cash-flow-statement-based aggregate accruals
The aggregate accruals exhibit considerable volatility throughout the period. After peaking at $9,474 million in 2022, the accruals drop sharply into negative territory in 2023, showing a value of -$3,845 million. In 2024, there is a recovery to a positive $1,474 million, yet the figure remains considerably lower than the peak observed in 2022.
Cash-flow-statement-based accruals ratio
This ratio mirrors the trends seen in the aggregate accruals but expressed as a percentage of net operating assets. It starts relatively high at 48.48% in 2020, then declines significantly to 15.61% in 2021. In 2022, the ratio climbs again to 46.91%, before dropping to a negative value of -14.57% in 2023. By 2024, the ratio returns to a positive but lower level of 5.53%, indicating greater variability and fluctuation over time.
Overall insights
The analysis reveals that net operating assets have grown steadily, reflecting expansion or accumulation of operating resources. However, the cash-flow-statement-based measures display marked instability, with large swings in accruals and accrual ratios suggesting fluctuations in earnings quality or timing differences between cash flows and accrual-based accounting figures. The considerable negative movement in 2023 for accruals and their ratio could indicate a period of less reliable accrual performance or significant changes in working capital components.