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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- Statement of Comprehensive Income
- Common-Size Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Solvency Ratios
- Analysis of Reportable Segments
- Dividend Discount Model (DDM)
- Operating Profit Margin since 2005
- Return on Equity (ROE) since 2005
- Return on Assets (ROA) since 2005
- Debt to Equity since 2005
- Price to Earnings (P/E) since 2005
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Balance-Sheet-Based Accruals Ratio
AT&T Inc., balance sheet computation of aggregate accruals
US$ in millions
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Operating Assets | ||||||
| Total assets | ||||||
| Less: Cash and cash equivalents | ||||||
| Operating assets | ||||||
| Operating Liabilities | ||||||
| Total liabilities | ||||||
| Less: Debt maturing within one year | ||||||
| Less: Long-term debt, excluding maturing within one year | ||||||
| Operating liabilities | ||||||
| Net operating assets1 | ||||||
| Balance-sheet-based aggregate accruals2 | ||||||
| Financial Ratio | ||||||
| Balance-sheet-based accruals ratio3 | ||||||
| Benchmarks | ||||||
| Balance-Sheet-Based Accruals Ratio, Competitors4 | ||||||
| T-Mobile US 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: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 2024 Calculation
Net operating assets = Operating assets – Operating liabilities
= – =
2 2024 Calculation
Balance-sheet-based aggregate accruals = Net operating assets2024 – Net operating assets2023
= – =
3 2024 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 data reflects fluctuations in net operating assets and accruals ratios over the four-year period. Net operating assets show a significant decline from 2021 to 2022, dropping from approximately $340 billion to $239 billion. This decrease is followed by a slight recovery in 2023 with net operating assets rising to around $250 billion, before declining again to about $240 billion in 2024.
Regarding balance-sheet-based aggregate accruals, the values shift notably between positive and negative figures over the period. In 2021, aggregate accruals are positive at roughly $13.3 billion, whereas in 2022, they turn sharply negative to approximately -$101.4 billion. The following year exhibits a return to positive accruals at about $11.4 billion, then again negative in 2024 at approximately -$9.6 billion. This alternating pattern indicates variability in accrual components influencing earnings quality.
The balance-sheet-based accruals ratio shows corresponding volatility, taking positive values in 2021 (3.99%) and 2023 (4.66%), but turning markedly negative in 2022 (-35.04%) and 2024 (-3.9%). The pronounced negative ratio in 2022 is consistent with the large negative aggregate accruals noted in the same year and suggests a considerable reduction in accrual-related earnings components relative to net operating assets.
Overall, the trend in both aggregate accruals and the accruals ratio indicates periods of substantial change in accrual accounting elements, which may affect the quality and sustainability of reported earnings during these years. The notable negative accrual figures in 2022 and 2024 contrast with the positive accruals in the adjacent years, illustrating inconsistency in accruals management or financial reporting practices over time.
Cash-Flow-Statement-Based Accruals Ratio
AT&T Inc., cash flow statement computation of aggregate accruals
US$ in millions
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Net income (loss) attributable to AT&T | ||||||
| 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 | ||||||
| T-Mobile US 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: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 2024 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.
- Net operating assets
- The net operating assets exhibit a notable decline from 340,040 million US dollars at the end of 2021 to 238,646 million in 2022. This sharp decrease is followed by a modest recovery to 250,024 million in 2023, before declining again to 240,459 million in 2024. Overall, the trend over the four years shows a reduction in net operating assets, indicating a contraction in the operating asset base.
- Cash-flow-statement-based aggregate accruals
- The aggregate accruals present a positive value of 10,213 million US dollars in 2021, which shifts to negative values in subsequent years. Specifically, there is a large negative accrual of -17,437 million in 2022, followed by smaller negative accruals of -4,254 million in 2023 and -10,333 million in 2024. The trend suggests increasing negative accruals in 2022 with some fluctuations thereafter, implying potential changes in earnings quality or accrual management.
- Cash-flow-statement-based accruals ratio
- The accruals ratio aligns with the aggregate accruals pattern, starting at a positive 3.06% in 2021, then turning negative at -6.03% in 2022. It slightly improves to -1.74% in 2023 but falls again to -4.21% in 2024. This ratio reflects the proportion of accruals to net operating assets and indicates a deteriorating quality of accruals post-2021, with the ratio consistently negative from 2022 onward. The fluctuations suggest variable earnings quality and potential volatility in the company's accrual accounting.