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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Regeneron Pharmaceuticals Inc. pages available for free this week:
- Balance Sheet: Liabilities and Stockholders’ Equity
- Common-Size Balance Sheet: Assets
- Analysis of Solvency Ratios
- Analysis of Short-term (Operating) Activity Ratios
- Analysis of Geographic Areas
- Common Stock Valuation Ratios
- Operating Profit Margin since 2005
- Return on Equity (ROE) since 2005
- Current Ratio since 2005
- Price to Operating Profit (P/OP) since 2005
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Balance-Sheet-Based Accruals Ratio
Regeneron Pharmaceuticals Inc., balance sheet computation of aggregate accruals
US$ in thousands
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| Operating Assets | ||||||
| Total assets | ||||||
| Less: Cash and cash equivalents | ||||||
| Less: Marketable securities | ||||||
| Operating assets | ||||||
| Operating Liabilities | ||||||
| Total liabilities | ||||||
| Less: Finance lease liabilities, current portion | ||||||
| Less: Long-term debt | ||||||
| Less: Finance lease liabilities, excluding current portion | ||||||
| Operating liabilities | ||||||
| Net operating assets1 | ||||||
| Balance-sheet-based aggregate accruals2 | ||||||
| Financial Ratio | ||||||
| Balance-sheet-based accruals ratio3 | ||||||
| Benchmarks | ||||||
| Balance-Sheet-Based Accruals Ratio, Competitors4 | ||||||
| AbbVie Inc. | ||||||
| Amgen Inc. | ||||||
| Bristol-Myers Squibb Co. | ||||||
| Danaher Corp. | ||||||
| Eli Lilly & Co. | ||||||
| Gilead Sciences Inc. | ||||||
| Johnson & Johnson | ||||||
| Merck & Co. Inc. | ||||||
| Pfizer Inc. | ||||||
| Thermo Fisher Scientific Inc. | ||||||
| Vertex Pharmaceuticals Inc. | ||||||
| Balance-Sheet-Based Accruals Ratio, Sector | ||||||
| Pharmaceuticals, Biotechnology & Life Sciences | ||||||
| Balance-Sheet-Based Accruals Ratio, Industry | ||||||
| Health Care | ||||||
Based on: 10-K (reporting date: 2025-12-31), 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).
1 2025 Calculation
Net operating assets = Operating assets – Operating liabilities
= – =
2 2025 Calculation
Balance-sheet-based aggregate accruals = Net operating assets2025 – Net operating assets2024
= – =
3 2025 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 balance-sheet-based accruals ratio exhibits considerable fluctuation over the observed period. Net operating assets demonstrate a consistent upward trend, while aggregate accruals and the resulting accruals ratio display more volatile behavior.
- Net Operating Assets
- Net operating assets increased from US$17,623,100 thousand in 2022 to US$25,357,600 thousand in 2025. This represents a cumulative increase of approximately 43.86% over the four-year period, indicating consistent growth in the company’s operational asset base.
- Balance-Sheet-Based Aggregate Accruals
- Aggregate accruals experienced a substantial decrease from US$1,849,300 thousand in 2022 to US$208,100 thousand in 2023. However, these accruals increased significantly in 2024 to US$5,214,300 thousand before decreasing again in 2025 to US$2,312,100 thousand. This pattern suggests potential shifts in the timing of revenue and expense recognition, or changes in working capital management.
- Balance-Sheet-Based Accruals Ratio
- The accruals ratio mirrored the fluctuations in aggregate accruals. It began at 11.07% in 2022, plummeted to 1.17% in 2023, then surged to 25.51% in 2024, and subsequently declined to 9.55% in 2025. The significant increase in 2024 warrants further investigation, as a ratio of 25.51% is notably higher than the other periods and could indicate aggressive accounting practices or a temporary anomaly. The return to 9.55% in 2025 suggests a partial correction, but continued monitoring is advisable. The substantial variation in this ratio suggests potential inconsistencies in earnings quality that require further scrutiny.
The divergence between the steady growth in net operating assets and the volatile accruals ratio suggests a complex relationship between operational performance and reported earnings. The fluctuations in aggregate accruals and the accruals ratio highlight the need for a deeper understanding of the underlying accounting policies and business events driving these changes.
Cash-Flow-Statement-Based Accruals Ratio
Regeneron Pharmaceuticals Inc., cash flow statement computation of aggregate accruals
US$ in thousands
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| Net income | ||||||
| Less: Net cash provided by operating activities | ||||||
| Less: Net cash used in investing activities | ||||||
| Cash-flow-statement-based aggregate accruals | ||||||
| Financial Ratio | ||||||
| Cash-flow-statement-based accruals ratio1 | ||||||
| Benchmarks | ||||||
| Cash-Flow-Statement-Based Accruals Ratio, Competitors2 | ||||||
| AbbVie Inc. | ||||||
| Amgen Inc. | ||||||
| Bristol-Myers Squibb Co. | ||||||
| Danaher Corp. | ||||||
| Eli Lilly & Co. | ||||||
| Gilead Sciences Inc. | ||||||
| Johnson & Johnson | ||||||
| Merck & Co. Inc. | ||||||
| Pfizer Inc. | ||||||
| Thermo Fisher Scientific Inc. | ||||||
| Vertex Pharmaceuticals Inc. | ||||||
| Cash-Flow-Statement-Based Accruals Ratio, Sector | ||||||
| Pharmaceuticals, Biotechnology & Life Sciences | ||||||
| Cash-Flow-Statement-Based Accruals Ratio, Industry | ||||||
| Health Care | ||||||
Based on: 10-K (reporting date: 2025-12-31), 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).
1 2025 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.
The information presents a review of net operating assets, cash-flow-statement-based aggregate accruals, and the resulting accruals ratio over a four-year period. Net operating assets demonstrate a consistent upward trend throughout the period, increasing from 17,623,100 to 25,357,600. Simultaneously, cash-flow-statement-based aggregate accruals exhibit a significant decline. The accruals ratio, calculated from these figures, reflects this dynamic, showing a marked decrease over the observed timeframe.
- Net Operating Assets
- Net operating assets increased steadily each year. The growth rate appears to accelerate from 2023 to 2024, and continues at a substantial pace through 2025. This suggests increasing investment in operating activities or a rise in the value of existing operating assets.
- Cash-Flow-Statement-Based Aggregate Accruals
- Aggregate accruals decreased from 3,108,100 in 2022 to 155,100 in 2025. This represents a substantial reduction, indicating a diminishing reliance on accruals to explain changes in net operating assets. The largest decrease occurred between 2024 and 2025.
- Cash-Flow-Statement-Based Accruals Ratio
- The accruals ratio decreased significantly from 18.61% in 2022 to 0.64% in 2025. This decline suggests a strengthening relationship between cash flows and reported earnings. A lower accruals ratio is generally associated with higher earnings quality, as it indicates that a smaller proportion of reported income is based on accounting estimates rather than actual cash transactions. The ratio’s substantial drop in the final year warrants further investigation to understand the underlying drivers.
The combined trends suggest a shift towards greater cash-based earnings. The substantial decrease in the accruals ratio, coupled with the increasing net operating assets, could indicate improved financial reporting quality. However, the magnitude of the change in the accruals ratio in the most recent year suggests a need for further scrutiny to determine if this represents a sustainable trend or a temporary fluctuation.