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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T-Mobile US Inc. pages available for free this week:
- Common-Size Income Statement
- Analysis of Profitability Ratios
- Analysis of Solvency Ratios
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Dividend Discount Model (DDM)
- Selected Financial Data since 2013
- Net Profit Margin since 2013
- Current Ratio since 2013
- Price to Earnings (P/E) since 2013
- Analysis of Debt
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Balance-Sheet-Based Accruals Ratio
T-Mobile US Inc., balance sheet computation of aggregate accruals
US$ in millions
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| Operating Assets | ||||||
| Total assets | ||||||
| Less: Cash and cash equivalents | ||||||
| Operating assets | ||||||
| Operating Liabilities | ||||||
| Total liabilities | ||||||
| Less: Short-term debt | ||||||
| Less: Short-term debt to affiliates | ||||||
| Less: Short-term financing lease liabilities | ||||||
| Less: Long-term debt | ||||||
| Less: Long-term debt to affiliates | ||||||
| Less: Long-term financing lease 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 | ||||||
| AT&T Inc. | ||||||
| Verizon Communications Inc. | ||||||
| Balance-Sheet-Based Accruals Ratio, Sector | ||||||
| Telecommunication Services | ||||||
| Balance-Sheet-Based Accruals Ratio, Industry | ||||||
| Communication Services | ||||||
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 exhibited considerable fluctuation over the four-year period. Net operating assets demonstrated a relatively stable trajectory, with a slight increase observed from 2022 to 2025.
- Net Operating Assets
- Net operating assets decreased from US$139,640 million in 2022 to US$137,094 million in 2023, remained relatively flat at US$136,923 million in 2024, and then increased to US$142,157 million in 2025. This suggests a period of stabilization followed by moderate growth.
- Balance-Sheet-Based Aggregate Accruals
- Balance-sheet-based aggregate accruals were positive at US$401 million in 2022, then experienced a substantial negative swing to negative US$2,546 million in 2023. Accruals became less negative in 2024, reaching negative US$171 million, before turning significantly positive at US$5,234 million in 2025. This volatility indicates significant changes in the timing of cash flows relative to reported earnings.
- Balance-Sheet-Based Accruals Ratio
- The balance-sheet-based accruals ratio was 0.29% in 2022. A marked decrease was observed in 2023, with the ratio falling to -1.84%. The ratio remained negative, though less pronounced, at -0.12% in 2024. A substantial positive shift occurred in 2025, with the ratio reaching 3.75%. This pattern suggests a potential shift in earnings quality, with a significant reliance on accruals to bolster reported earnings in 2025, following a period where accruals reduced reported earnings in 2023 and 2024. The large fluctuations warrant further investigation into the underlying drivers of these accruals.
The considerable changes in the balance-sheet-based accruals ratio, particularly the swing from negative to positive values, suggest potential areas for further scrutiny regarding the company’s accounting practices and earnings management activities. The correlation between accruals and net operating assets appears limited, with the assets showing a more consistent trend than the accruals.
Cash-Flow-Statement-Based Accruals Ratio
T-Mobile US Inc., cash flow statement computation of aggregate accruals
US$ in millions
| 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 | ||||||
| AT&T Inc. | ||||||
| Verizon Communications Inc. | ||||||
| Cash-Flow-Statement-Based Accruals Ratio, Sector | ||||||
| Telecommunication Services | ||||||
| Cash-Flow-Statement-Based Accruals Ratio, Industry | ||||||
| Communication Services | ||||||
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 analysis reveals fluctuations in aggregate accruals and the corresponding accruals ratio over a four-year period. Net operating assets experienced a slight decline from 2022 to 2024, followed by an increase in 2025.
- Cash-Flow-Statement-Based Aggregate Accruals
- Cash-flow-statement-based aggregate accruals exhibited a significant increase in absolute value from negative US$1,832 million in 2022 to negative US$4,413 million in 2023. This indicates a substantial increase in non-cash deductions from net income when calculating cash flow from operations. A partial recovery was observed in 2024, with accruals decreasing to negative US$1,882 million. Notably, accruals turned positive in 2025, reaching US$649 million, suggesting a shift towards non-cash additions to net income.
- Cash-Flow-Statement-Based Accruals Ratio
- The accruals ratio mirrored the trend in aggregate accruals. It decreased from -1.31% in 2022 to -3.19% in 2023, signifying a larger proportion of net income attributable to accruals. The ratio improved to -1.37% in 2024, remaining negative but less pronounced. A substantial change occurred in 2025, with the accruals ratio becoming positive at 0.47%, indicating that accruals contributed positively to net income relative to cash flow from operations.
- Overall Interpretation
- The observed patterns suggest a period of increasing reliance on accruals to manage reported earnings in 2023, followed by a partial correction in 2024. The positive accruals ratio in 2025 is a notable shift, potentially indicating improved cash generation relative to reported income or a change in accounting practices. Further investigation into the specific components of accruals is recommended to understand the underlying drivers of these fluctuations and assess the quality of earnings.