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
Take-Two Interactive Software Inc., balance sheet computation of aggregate accruals
US$ in thousands
| Mar 31, 2025 | Mar 31, 2024 | Mar 31, 2023 | Mar 31, 2022 | Mar 31, 2021 | Mar 31, 2020 | ||
|---|---|---|---|---|---|---|---|
| Operating Assets | |||||||
| Total assets | 9,180,700) | 12,216,900) | 15,862,100) | 6,546,219) | 6,028,218) | 4,948,832) | |
| Less: Cash and cash equivalents | 1,456,100) | 754,000) | 827,400) | 1,732,047) | 1,422,884) | 1,357,664) | |
| Less: Short-term investments | 9,400) | 22,000) | 187,000) | 820,060) | 1,308,692) | 644,003) | |
| Less: Restricted cash and cash equivalents | 14,900) | 252,100) | 307,600) | 359,832) | 538,822) | 546,604) | |
| Operating assets | 7,700,300) | 11,188,800) | 14,540,100) | 3,634,280) | 2,757,820) | 2,400,561) | |
| Operating Liabilities | |||||||
| Total liabilities | 7,043,000) | 6,549,000) | 6,819,600) | 2,736,560) | 2,696,326) | 2,409,588) | |
| Less: Short-term debt, net | 1,148,500) | 24,600) | 1,346,800) | —) | —) | —) | |
| Less: Long-term debt, net | 2,512,600) | 3,058,300) | 1,733,000) | —) | —) | —) | |
| Operating liabilities | 3,381,900) | 3,466,100) | 3,739,800) | 2,736,560) | 2,696,326) | 2,409,588) | |
| Net operating assets1 | 4,318,400) | 7,722,700) | 10,800,300) | 897,720) | 61,494) | (9,027) | |
| Balance-sheet-based aggregate accruals2 | (3,404,300) | (3,077,600) | 9,902,580) | 836,226) | 70,521) | —) | |
| Financial Ratio | |||||||
| Balance-sheet-based accruals ratio3 | -56.54% | -33.23% | 169.30% | 174.36% | 268.82% | — | |
| Benchmarks | |||||||
| Balance-Sheet-Based Accruals Ratio, Competitors4 | |||||||
| Alphabet Inc. | — | 26.92% | 17.24% | 21.43% | 22.86% | — | |
| Comcast Corp. | — | 2.10% | 1.29% | -6.76% | -0.48% | — | |
| Meta Platforms Inc. | — | 22.82% | 11.12% | 20.95% | 14.69% | — | |
| Netflix Inc. | — | 9.36% | -3.78% | 14.21% | 27.24% | — | |
| Walt Disney Co. | — | 0.01% | 0.08% | 3.09% | 1.73% | -4.26% | |
| Balance-Sheet-Based Accruals Ratio, Sector | |||||||
| Media & Entertainment | 0.00% | 13.40% | 6.80% | 7.77% | 8.30% | — | |
| Balance-Sheet-Based Accruals Ratio, Industry | |||||||
| Communication Services | 0.00% | 6.13% | 4.26% | -3.77% | 10.23% | — | |
Based on: 10-K (reporting date: 2025-03-31), 10-K (reporting date: 2024-03-31), 10-K (reporting date: 2023-03-31), 10-K (reporting date: 2022-03-31), 10-K (reporting date: 2021-03-31), 10-K (reporting date: 2020-03-31).
1 2025 Calculation
Net operating assets = Operating assets – Operating liabilities
= 7,700,300 – 3,381,900 = 4,318,400
2 2025 Calculation
Balance-sheet-based aggregate accruals = Net operating assets2025 – Net operating assets2024
= 4,318,400 – 7,722,700 = -3,404,300
3 2025 Calculation
Balance-sheet-based accruals ratio = 100 × Balance-sheet-based aggregate accruals ÷ Avg. net operating assets
= 100 × -3,404,300 ÷ [(4,318,400 + 7,722,700) ÷ 2] = -56.54%
4 Click competitor name to see calculations.
The analysis of the financial measures over the five-year period reveals significant variations in the company's net operating assets and accruals-related metrics, highlighting notable shifts in financial dynamics.
- Net Operating Assets
- The net operating assets increased markedly from 61,494 thousand US dollars in 2021 to a peak of 10,800,300 thousand US dollars in 2023. However, the figure declined substantially in the subsequent years, decreasing to 7,722,700 thousand in 2024 and further down to 4,318,400 thousand in 2025. This trend indicates a rapid expansion phase followed by a considerable contraction in net operating assets.
- Balance-sheet-based Aggregate Accruals
- Aggregate accruals experienced a sharp increase from 70,521 thousand US dollars in 2021 to 9,902,580 thousand in 2023, mirroring the growth pattern of net operating assets. Nonetheless, the value turned negative in 2024 and continued to decline to -3,407,300 thousand in 2025. The shift from large positive accruals to substantial negative accruals suggests a significant change in the recognition or reversal of accruals during these periods.
- Balance-sheet-based Accruals Ratio
- The accruals ratio started at a high 268.82% in 2021 and then steadily decreased over the next two years to 169.3% in 2023. It then sharply dropped to negative territory with -33.23% in 2024, and further down to -56.54% in 2025. The negative ratios in the last two years imply that accruals have been moving opposite to net operating assets, which could impact earnings quality and signal potential issues in financial reporting consistency.
Overall, the data reveals a period of aggressive growth in asset base and accruals up to 2023, followed by pronounced contractions and reversals in accruals metrics in the subsequent years, which may warrant closer examination of the underlying causes and potential implications for financial performance and reporting quality.
Cash-Flow-Statement-Based Accruals Ratio
Take-Two Interactive Software Inc., cash flow statement computation of aggregate accruals
US$ in thousands
| Mar 31, 2025 | Mar 31, 2024 | Mar 31, 2023 | Mar 31, 2022 | Mar 31, 2021 | Mar 31, 2020 | ||
|---|---|---|---|---|---|---|---|
| Net income (loss) | (4,478,900) | (3,744,200) | (1,124,700) | 418,022) | 588,886) | 404,459) | |
| Less: Net cash provided by (used in) operating activities | (45,200) | (16,100) | 1,100) | 257,984) | 912,318) | 685,678) | |
| Less: Net cash (used in) provided by investing activities | (151,500) | (28,200) | (2,876,300) | 139,216) | (806,724) | 4,049) | |
| Cash-flow-statement-based aggregate accruals | (4,282,200) | (3,699,900) | 1,750,500) | 20,822) | 483,292) | (285,268) | |
| Financial Ratio | |||||||
| Cash-flow-statement-based accruals ratio1 | -71.13% | -39.95% | 29.93% | 4.34% | 1,842.27% | — | |
| Benchmarks | |||||||
| Cash-Flow-Statement-Based Accruals Ratio, Competitors2 | |||||||
| Alphabet Inc. | — | 9.42% | -0.52% | -7.90% | 17.48% | — | |
| Comcast Corp. | — | 2.38% | -3.44% | -3.88% | -0.83% | — | |
| Meta Platforms Inc. | — | 15.08% | -7.43% | 1.96% | -14.89% | — | |
| Netflix Inc. | — | 12.03% | -8.44% | 16.73% | 27.32% | — | |
| Walt Disney Co. | — | -1.46% | -1.97% | 1.50% | -0.29% | -4.68% | |
| Cash-Flow-Statement-Based Accruals Ratio, Sector | |||||||
| Media & Entertainment | 0.00% | 6.42% | -3.16% | -1.69% | 2.49% | — | |
| Cash-Flow-Statement-Based Accruals Ratio, Industry | |||||||
| Communication Services | 0.00% | 2.38% | -2.47% | -1.31% | 6.79% | — | |
Based on: 10-K (reporting date: 2025-03-31), 10-K (reporting date: 2024-03-31), 10-K (reporting date: 2023-03-31), 10-K (reporting date: 2022-03-31), 10-K (reporting date: 2021-03-31), 10-K (reporting date: 2020-03-31).
1 2025 Calculation
Cash-flow-statement-based accruals ratio = 100 × Cash-flow-statement-based aggregate accruals ÷ Avg. net operating assets
= 100 × -4,282,200 ÷ [(4,318,400 + 7,722,700) ÷ 2] = -71.13%
2 Click competitor name to see calculations.
The analysis of the annual financial reporting quality measures over the periods presented reveals notable fluctuations and shifts in the respective figures. The data exhibits marked volatility especially in the accrual measures and net operating assets, indicating significant changes in the company's financial activity and reporting quality over the years.
- Net Operating Assets
- There is a substantial increase in net operating assets from 61,494 thousand US dollars in 2021 to a peak of 10,800,300 thousand US dollars in 2023. This is followed by a marked decline to 7,722,700 thousand in 2024 and further down to 4,318,400 thousand in 2025. The initial sharp rise suggests rapid asset growth or acquisitions, while the subsequent declines may indicate asset disposals, impairments, or operational adjustments.
- Cash-Flow-Statement-Based Aggregate Accruals
- The aggregate accruals show considerable variability. Starting at 483,292 thousand in 2021, the figure falls dramatically to 20,822 thousand in 2022, then spikes again to 1,750,500 thousand in 2023. Notably, it turns negative in 2024 and 2025, reaching -3,699,900 thousand and -4,282,200 thousand respectively. This shift into negative territory signifies a reversal in accruals, which may reflect changes in working capital or earnings quality.
- Cash-Flow-Statement-Based Accruals Ratio
- The accruals ratio exhibits extreme variation, beginning at an exceptionally high 1842.27% in 2021, dropping drastically to 4.34% in 2022, before increasing to 29.93% in 2023. It then reverses to -39.95% in 2024 and further declines to -71.13% in 2025. The ratio’s volatility and eventual negative values indicate deteriorating alignment between accruals and cash flows, possibly pointing to reduced earnings quality or increased financial statement manipulation risk in the later years.
Overall, the trends suggest an initial period of significant growth and increasing accruals followed by a phase marked by asset reduction and increasingly negative accrual ratios. The negative accrual ratios and high variability in recent years underline potential concerns regarding financial reporting quality and warrant deeper investigation into the underlying causes and accounting practices.