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
United Airlines Holdings 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 | 76,448) | 74,083) | 71,104) | 67,358) | 68,175) | |
| Less: Cash and cash equivalents | 5,942) | 8,769) | 6,058) | 7,166) | 18,283) | |
| Less: Short-term investments | 6,298) | 5,706) | 8,330) | 9,248) | 123) | |
| Operating assets | 64,208) | 59,608) | 56,716) | 50,944) | 49,769) | |
| Operating Liabilities | ||||||
| Total liabilities | 61,166) | 61,408) | 61,780) | 60,462) | 63,146) | |
| Less: Current maturities of long-term debt, finance leases, and other financial liabilities | 4,426) | 3,453) | 4,247) | 3,038) | 3,912) | |
| Less: Long-term debt, finance leases, and other financial liabilities, less current portion | 20,562) | 25,203) | 27,413) | 29,242) | 31,443) | |
| Operating liabilities | 36,178) | 32,752) | 30,120) | 28,182) | 27,791) | |
| Net operating assets1 | 28,030) | 26,856) | 26,596) | 22,762) | 21,978) | |
| Balance-sheet-based aggregate accruals2 | 1,174) | 260) | 3,834) | 784) | —) | |
| Financial Ratio | ||||||
| Balance-sheet-based accruals ratio3 | 4.28% | 0.97% | 15.54% | 3.50% | — | |
| Benchmarks | ||||||
| Balance-Sheet-Based Accruals Ratio, Competitors4 | ||||||
| FedEx Corp. | 4.42% | 3.63% | 3.85% | 0.91% | 6.93% | |
| Uber Technologies Inc. | 20.97% | 40.44% | 21.78% | -40.74% | — | |
| Union Pacific Corp. | 4.06% | 1.61% | 3.95% | 3.63% | — | |
| United Parcel Service Inc. | 7.77% | -13.05% | 7.14% | 26.54% | — | |
| Balance-Sheet-Based Accruals Ratio, Sector | ||||||
| Transportation | 7.49% | 3.77% | 8.09% | 2.58% | — | |
| Balance-Sheet-Based Accruals Ratio, Industry | ||||||
| Industrials | 5.68% | 4.36% | -0.84% | 0.67% | — | |
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
= 64,208 – 36,178 = 28,030
2 2025 Calculation
Balance-sheet-based aggregate accruals = Net operating assets2025 – Net operating assets2024
= 28,030 – 26,856 = 1,174
3 2025 Calculation
Balance-sheet-based accruals ratio = 100 × Balance-sheet-based aggregate accruals ÷ Avg. net operating assets
= 100 × 1,174 ÷ [(28,030 + 26,856) ÷ 2] = 4.28%
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$22,762 million in 2022 to US$28,030 million in 2025, representing a cumulative growth of approximately 23.2%. The growth appears relatively steady year-over-year.
- Balance-Sheet-Based Aggregate Accruals
- Balance-sheet-based aggregate accruals increased significantly from US$784 million in 2022 to US$3,834 million in 2023. This represents a substantial increase. However, accruals decreased sharply to US$260 million in 2024 before rising again to US$1,174 million in 2025. This pattern suggests potential shifts in the timing of revenue and expense recognition or changes in working capital management.
- Balance-Sheet-Based Accruals Ratio
- The accruals ratio mirrored the fluctuations in aggregate accruals. It rose dramatically from 3.50% in 2022 to 15.54% in 2023, coinciding with the increase in aggregate accruals. A significant decline followed in 2024, with the ratio falling to 0.97%. The ratio then increased to 4.28% in 2025. The substantial variation in the accruals ratio warrants further investigation to determine the underlying drivers and assess potential implications for earnings quality. A ratio of 15.54% in 2023 is notably higher than the other years presented, potentially indicating aggressive accounting practices or a temporary anomaly. The return to a lower ratio in subsequent years does not necessarily negate the need for scrutiny of the 2023 figures.
The divergence between the steady growth in net operating assets and the volatile accruals ratio suggests a complex relationship between operating performance and accounting choices. Further analysis, including a comparison to industry peers and a review of the company’s accounting policies, is recommended to fully understand the observed trends.
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Cash-Flow-Statement-Based Accruals Ratio
United Airlines Holdings Inc., cash flow statement computation of aggregate accruals
US$ in millions
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| Net income (loss) | 3,353) | 3,149) | 2,618) | 737) | (1,964) | |
| Less: Net cash provided by operating activities | 8,431) | 9,445) | 6,911) | 6,066) | 2,067) | |
| Less: Net cash used in investing activities | (6,350) | (2,651) | (6,106) | (13,829) | (1,672) | |
| Cash-flow-statement-based aggregate accruals | 1,272) | (3,645) | 1,813) | 8,500) | (2,359) | |
| Financial Ratio | ||||||
| Cash-flow-statement-based accruals ratio1 | 4.64% | -13.64% | 7.35% | 38.00% | — | |
| Benchmarks | ||||||
| Cash-Flow-Statement-Based Accruals Ratio, Competitors2 | ||||||
| FedEx Corp. | 2.72% | 3.01% | 3.32% | 2.12% | 3.01% | |
| Uber Technologies Inc. | 12.72% | 28.63% | 10.31% | -49.13% | — | |
| Union Pacific Corp. | 3.35% | 1.55% | 3.67% | 2.53% | — | |
| United Parcel Service Inc. | 5.59% | -12.08% | 10.26% | 16.44% | — | |
| Cash-Flow-Statement-Based Accruals Ratio, Sector | ||||||
| Transportation | 5.27% | 0.04% | 6.23% | 4.77% | — | |
| Cash-Flow-Statement-Based Accruals Ratio, Industry | ||||||
| Industrials | 2.24% | 5.28% | 1.66% | -2.30% | — | |
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 × 1,272 ÷ [(28,030 + 26,856) ÷ 2] = 4.64%
2 Click competitor name to see calculations.
The analysis reveals significant fluctuations in cash-flow-statement-based accruals and the associated accruals ratio over the four-year period. Net operating assets demonstrate a consistent, albeit moderate, increase throughout the period, while accrual metrics exhibit substantial volatility.
- Cash-Flow-Statement-Based Aggregate Accruals
- Cash-flow-statement-based aggregate accruals decreased markedly from US$8,500 million in 2022 to US$1,813 million in 2023. This represents a substantial reduction in the difference between net income and cash flow from operations. A further, dramatic shift occurred in 2024, with accruals becoming negative at US$-3,645 million. This indicates that cash flow from operations exceeded net income by a significant margin. In 2025, accruals returned to positive territory, reaching US$1,272 million, though remaining considerably lower than the 2022 level.
- Cash-Flow-Statement-Based Accruals Ratio
- The accruals ratio mirrors the trend in aggregate accruals. It began at 38.00% in 2022, indicating a substantial portion of reported earnings was attributable to accruals rather than cash flow. The ratio declined sharply to 7.35% in 2023, suggesting a reduced reliance on accruals. In 2024, the ratio became negative at -13.64%, signifying that cash flow from operations contributed more to earnings than accruals. The ratio recovered to 4.64% in 2025, but remained significantly below the 2022 and 2023 levels.
The observed patterns suggest a changing relationship between reported earnings and underlying cash flows. The large decrease in accruals and the accruals ratio from 2022 to 2023, followed by negative accruals in 2024, warrants further investigation. While a negative accruals ratio is not inherently negative, a substantial swing like this could indicate changes in working capital management, revenue recognition practices, or expense timing. The partial recovery in 2025 suggests a stabilization, but continued monitoring is recommended to assess the sustainability of this trend.
The consistent growth in net operating assets alongside the volatile accrual patterns suggests that asset growth is not necessarily driving the fluctuations in accruals. The primary driver appears to be changes in the timing and magnitude of accruals themselves.
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