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
Super Micro Computer Inc., balance sheet computation of aggregate accruals
US$ in thousands
| Jun 30, 2025 | Jun 30, 2024 | Jun 30, 2023 | Jun 30, 2022 | Jun 30, 2021 | Jun 30, 2020 | ||
|---|---|---|---|---|---|---|---|
| Operating Assets | |||||||
| Total assets | 14,018,429) | 9,826,092) | 3,674,729) | 3,205,077) | 2,241,964) | 1,918,646) | |
| Less: Cash and cash equivalents | 5,169,911) | 1,669,766) | 440,459) | 267,397) | 232,266) | 210,533) | |
| Operating assets | 8,848,518) | 8,156,326) | 3,234,270) | 2,937,680) | 2,009,698) | 1,708,113) | |
| Operating Liabilities | |||||||
| Total liabilities | 7,716,558) | 4,408,722) | 1,702,559) | 1,779,330) | 1,145,566) | 852,939) | |
| Less: Lines of credit and current portion of term loans | 75,060) | 402,346) | 170,123) | 449,146) | 63,490) | 23,704) | |
| Less: Term loans, non-current | 37,415) | 74,083) | 120,179) | 147,618) | 34,700) | 5,697) | |
| Less: Convertible notes | 4,645,178) | 1,697,716) | —) | —) | —) | —) | |
| Operating liabilities | 2,958,905) | 2,234,577) | 1,412,257) | 1,182,566) | 1,047,376) | 823,538) | |
| Net operating assets1 | 5,889,613) | 5,921,749) | 1,822,013) | 1,755,114) | 962,322) | 884,575) | |
| Balance-sheet-based aggregate accruals2 | (32,136) | 4,099,736) | 66,899) | 792,792) | 77,747) | —) | |
| Financial Ratio | |||||||
| Balance-sheet-based accruals ratio3 | -0.54% | 105.88% | 3.74% | 58.35% | 8.42% | — | |
| Benchmarks | |||||||
| Balance-Sheet-Based Accruals Ratio, Competitors4 | |||||||
| Apple Inc. | 17.98% | -12.64% | -9.04% | -2.12% | 36.09% | — | |
| Arista Networks Inc. | — | -26.64% | 17.14% | 106.22% | 24.14% | — | |
| Cisco Systems Inc. | 0.44% | 75.07% | -12.09% | 5.96% | 20.24% | — | |
| Dell Technologies Inc. | 18.00% | -9.55% | 12.16% | -89.81% | -10.71% | — | |
| Balance-Sheet-Based Accruals Ratio, Sector | |||||||
| Technology Hardware & Equipment | 0.00% | 11.96% | -6.96% | -13.35% | 22.01% | — | |
| Balance-Sheet-Based Accruals Ratio, Industry | |||||||
| Information Technology | 0.00% | 21.35% | 8.92% | 18.19% | 19.59% | — | |
Based on: 10-K (reporting date: 2025-06-30), 10-K (reporting date: 2024-06-30), 10-K (reporting date: 2023-06-30), 10-K (reporting date: 2022-06-30), 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30).
1 2025 Calculation
Net operating assets = Operating assets – Operating liabilities
= 8,848,518 – 2,958,905 = 5,889,613
2 2025 Calculation
Balance-sheet-based aggregate accruals = Net operating assets2025 – Net operating assets2024
= 5,889,613 – 5,921,749 = -32,136
3 2025 Calculation
Balance-sheet-based accruals ratio = 100 × Balance-sheet-based aggregate accruals ÷ Avg. net operating assets
= 100 × -32,136 ÷ [(5,889,613 + 5,921,749) ÷ 2] = -0.54%
4 Click competitor name to see calculations.
The analysis of the annual financial reporting quality measure data reveals significant fluctuations in key financial metrics over the five-year period.
- Net Operating Assets
- The net operating assets have shown a pronounced upward trend from June 2021 to June 2024, increasing from approximately 962 million US dollars to nearly 5.92 billion US dollars. This represents a substantial growth of over six times within three years. However, in the following year, June 2025, the net operating assets slightly declined but remained at a high level of approximately 5.89 billion US dollars, indicating sustained large asset base.
- Balance-sheet-based Aggregate Accruals
- Aggregate accruals exhibit considerable volatility throughout the period. After a moderate value of about 77.7 million US dollars in June 2021, there was a dramatic spike to roughly 793 million US dollars in June 2022, followed by a steep decline to around 66.9 million US dollars in June 2023. A notable surge occurred in June 2024, reaching approximately 4.10 billion US dollars, but in June 2025, the value turned negative, at approximately -32.1 million US dollars. This pattern indicates inconsistent accruals with periods of extreme increases and a reversal to a negative figure in the final year.
- Balance-sheet-based Accruals Ratio
- The accruals ratio demonstrates a highly irregular trajectory. From a relatively low of 8.42% in June 2021, it escalated dramatically to 58.35% in June 2022. A sharp decrease followed, dropping the ratio to 3.74% in June 2023. The ratio then surged again reaching an extremely high value of 105.88% in June 2024, before falling to a slightly negative ratio of -0.54% in June 2025. These wide swings in the accrual ratio reflect significant fluctuations in earnings quality and potential variability in earnings management or accrual processes over the years.
Overall, the data reveal pronounced growth in net operating assets alongside significant instability and volatility in the accrual measures. The sharp increases and decreases in both the aggregate accruals and accrual ratio suggest periods of considerable changes in earnings quality and financial reporting practices.
Cash-Flow-Statement-Based Accruals Ratio
Super Micro Computer Inc., cash flow statement computation of aggregate accruals
US$ in thousands
| Jun 30, 2025 | Jun 30, 2024 | Jun 30, 2023 | Jun 30, 2022 | Jun 30, 2021 | Jun 30, 2020 | ||
|---|---|---|---|---|---|---|---|
| Net income | 1,048,854) | 1,152,666) | 639,998) | 285,163) | 111,865) | 84,308) | |
| Less: Net cash provided by (used in) operating activities | 1,659,524) | (2,485,972) | 663,580) | (440,801) | 122,955) | (30,334) | |
| Less: Net cash used in investing activities | (183,214) | (194,248) | (39,486) | (46,282) | (58,016) | (43,588) | |
| Cash-flow-statement-based aggregate accruals | (427,456) | 3,832,886) | 15,904) | 772,246) | 46,926) | 158,230) | |
| Financial Ratio | |||||||
| Cash-flow-statement-based accruals ratio1 | -7.24% | 98.99% | 0.89% | 56.84% | 5.08% | — | |
| Benchmarks | |||||||
| Cash-Flow-Statement-Based Accruals Ratio, Competitors2 | |||||||
| Apple Inc. | -13.44% | -25.90% | -14.62% | 0.00% | 4.86% | — | |
| Arista Networks Inc. | — | 82.06% | 36.37% | 52.90% | 147.50% | — | |
| Cisco Systems Inc. | -9.79% | 46.78% | -7.65% | -10.18% | 1.64% | — | |
| Dell Technologies Inc. | 12.75% | -15.65% | 11.23% | -20.97% | -17.42% | — | |
| Cash-Flow-Statement-Based Accruals Ratio, Sector | |||||||
| Technology Hardware & Equipment | 0.00% | -2.79% | -10.03% | -4.10% | -0.72% | — | |
| Cash-Flow-Statement-Based Accruals Ratio, Industry | |||||||
| Information Technology | 0.00% | 6.25% | 1.40% | 2.99% | 8.76% | — | |
Based on: 10-K (reporting date: 2025-06-30), 10-K (reporting date: 2024-06-30), 10-K (reporting date: 2023-06-30), 10-K (reporting date: 2022-06-30), 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30).
1 2025 Calculation
Cash-flow-statement-based accruals ratio = 100 × Cash-flow-statement-based aggregate accruals ÷ Avg. net operating assets
= 100 × -427,456 ÷ [(5,889,613 + 5,921,749) ÷ 2] = -7.24%
2 Click competitor name to see calculations.
- Net Operating Assets
- The net operating assets exhibited a strong upward trend from June 30, 2021, to June 30, 2024, increasing from approximately 962 million US dollars to nearly 5.92 billion US dollars. This represents a more than sixfold growth over the four-year period. In the final period ending June 30, 2025, there is a slight decrease to about 5.89 billion US dollars, indicating a stabilization or minor reduction after significant expansion.
- Cash-flow-statement-based Aggregate Accruals
- The aggregate accruals showed significant volatility throughout the analyzed periods. Starting at around 46.9 million US dollars in 2021, the value sharply increased to 772.2 million in 2022. This was followed by a substantial decline in 2023 to approximately 15.9 million. In 2024, the accruals surged dramatically to roughly 3.83 billion, before falling into negative territory at approximately -427 thousand in 2025. These fluctuations suggest large variations in non-cash working capital components or timing differences in cash flows relative to earnings.
- Cash-flow-statement-based Accruals Ratio
- The accruals ratio, expressed as a percentage, mirrored the volatility seen in aggregate accruals. It rose from a modest 5.08% in 2021 to a very high 56.84% in 2022. This sharp increase indicates a significant increase in accrual-based earnings relative to operating cash flows during that year. The ratio then dropped steeply to 0.89% in 2023, signaling improved alignment between earnings and cash flows. However, in 2024, the ratio increased drastically again to nearly 99%, suggesting earnings were almost entirely driven by accruals. In 2025, the ratio turned negative to -7.24%, reflecting a reversal in accruals impact and potential earnings quality improvement or unusual items impacting cash flows.