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
AmerisourceBergen Corp., balance sheet computation of aggregate accruals
US$ in thousands
| Sep 30, 2022 | Sep 30, 2021 | Sep 30, 2020 | Sep 30, 2019 | Sep 30, 2018 | Sep 30, 2017 | ||
|---|---|---|---|---|---|---|---|
| Operating Assets | |||||||
| Total assets | 56,560,616) | 57,337,805) | 44,274,830) | 39,171,980) | 37,669,838) | 35,316,470) | |
| Less: Cash and cash equivalents | 3,388,189) | 2,547,142) | 4,597,746) | 3,374,194) | 2,492,516) | 2,435,115) | |
| Operating assets | 53,172,427) | 54,790,663) | 39,677,084) | 35,797,786) | 35,177,322) | 32,881,355) | |
| Operating Liabilities | |||||||
| Total liabilities | 56,489,343) | 56,753,394) | 45,114,466) | 36,178,774) | 34,619,877) | 33,252,009) | |
| Less: Short-term debt | 1,070,473) | 300,213) | 501,259) | 139,012) | 151,657) | 12,121) | |
| Less: Long-term debt, net of current portion | 4,632,360) | 6,383,711) | 3,618,261) | 4,033,880) | 4,158,532) | 3,429,934) | |
| Operating liabilities | 50,786,510) | 50,069,470) | 40,994,946) | 32,005,882) | 30,309,688) | 29,809,954) | |
| Net operating assets1 | 2,385,917) | 4,721,193) | (1,317,862) | 3,791,904) | 4,867,634) | 3,071,401) | |
| Balance-sheet-based aggregate accruals2 | (2,335,276) | 6,039,055) | (5,109,766) | (1,075,730) | 1,796,233) | —) | |
| Financial Ratio | |||||||
| Balance-sheet-based accruals ratio3 | -65.72% | 354.89% | -413.07% | -24.84% | 45.25% | — | |
| Benchmarks | |||||||
| Balance-Sheet-Based Accruals Ratio, Competitors4 | |||||||
| Abbott Laboratories | -0.73% | — | — | — | — | — | |
| Elevance Health Inc. | 0.32% | — | — | — | — | — | |
| Intuitive Surgical Inc. | -10.21% | — | — | — | — | — | |
| Medtronic PLC | -1.37% | — | — | — | — | — | |
| UnitedHealth Group Inc. | 17.32% | — | — | — | — | — | |
| Balance-Sheet-Based Accruals Ratio, Sector | |||||||
| Health Care Equipment & Services | 6.46% | 200.00% | — | — | — | — | |
| Balance-Sheet-Based Accruals Ratio, Industry | |||||||
| Health Care | 5.30% | 200.00% | — | — | — | — | |
Based on: 10-K (reporting date: 2022-09-30), 10-K (reporting date: 2021-09-30), 10-K (reporting date: 2020-09-30), 10-K (reporting date: 2019-09-30), 10-K (reporting date: 2018-09-30), 10-K (reporting date: 2017-09-30).
1 2022 Calculation
Net operating assets = Operating assets – Operating liabilities
= 53,172,427 – 50,786,510 = 2,385,917
2 2022 Calculation
Balance-sheet-based aggregate accruals = Net operating assets2022 – Net operating assets2021
= 2,385,917 – 4,721,193 = -2,335,276
3 2022 Calculation
Balance-sheet-based accruals ratio = 100 × Balance-sheet-based aggregate accruals ÷ Avg. net operating assets
= 100 × -2,335,276 ÷ [(2,385,917 + 4,721,193) ÷ 2] = -65.72%
4 Click competitor name to see calculations.
The financial data indicates extreme volatility in the balance-sheet-based accruals ratio and its underlying components between 2018 and 2022. The relationship between net operating assets and aggregate accruals shifted drastically, suggesting significant fluctuations in reporting quality or substantial non-cash adjustments within the operating structure.
- Net Operating Assets (NOA)
- Net operating assets experienced a period of instability, starting at 4.87 billion USD in 2018 and declining to 3.79 billion USD in 2019. A significant contraction occurred in 2020, where the value turned negative at -1.32 billion USD, before recovering sharply to 4.72 billion USD in 2021 and subsequently decreasing to 2.39 billion USD by 2022.
- Balance-Sheet-Based Aggregate Accruals
- Aggregate accruals demonstrated erratic swings in both direction and magnitude. After a positive position of 1.80 billion USD in 2018, the figures turned negative in 2019 and reached a trough of -5.11 billion USD in 2020. A reversal occurred in 2021 with a spike to 6.04 billion USD, followed by another decline to -2.34 billion USD in 2022.
- Balance-Sheet-Based Accruals Ratio
- The accruals ratio reflects the volatility of the preceding metrics, exhibiting extreme percentage shifts. The ratio moved from 45.25% in 2018 to -24.84% in 2019. The most acute divergence occurred in 2020 and 2021, with the ratio plummeting to -413.07% before surging to 354.89%. This pattern culminates in a return to negative territory at -65.72% in 2022.
The observed patterns suggest that the accruals ratio was heavily influenced by the sign and magnitude of the net operating assets, particularly in 2020 when the negative NOA denominator amplified the ratio's volatility. The drastic swings between high positive and high negative ratios indicate a lack of stability in the accruals relative to the asset base, which may signal significant non-cash movements or periodic restructuring of the balance sheet.
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Cash-Flow-Statement-Based Accruals Ratio
AmerisourceBergen Corp., cash flow statement computation of aggregate accruals
US$ in thousands
| Sep 30, 2022 | Sep 30, 2021 | Sep 30, 2020 | Sep 30, 2019 | Sep 30, 2018 | Sep 30, 2017 | ||
|---|---|---|---|---|---|---|---|
| Net income (loss) attributable to AmerisourceBergen Corporation | 1,698,820) | 1,539,932) | (3,408,716) | 855,365) | 1,658,405) | 364,484) | |
| Less: Net cash provided by operating activities | 2,703,088) | 2,666,586) | 2,207,040) | 2,344,023) | 1,411,388) | 1,504,138) | |
| Less: Net cash used in investing activities | (368,437) | (6,141,577) | (379,871) | (375,832) | (1,111,114) | (498,041) | |
| Cash-flow-statement-based aggregate accruals | (635,831) | 5,014,923) | (5,235,885) | (1,112,826) | 1,358,131) | (641,613) | |
| Financial Ratio | |||||||
| Cash-flow-statement-based accruals ratio1 | -17.89% | 294.71% | -423.27% | -25.70% | 34.21% | — | |
| Benchmarks | |||||||
| Cash-Flow-Statement-Based Accruals Ratio, Competitors2 | |||||||
| Abbott Laboratories | -2.08% | — | — | — | — | — | |
| Elevance Health Inc. | 8.35% | — | — | — | — | — | |
| Intuitive Surgical Inc. | -20.88% | — | — | — | — | — | |
| Medtronic PLC | -0.97% | — | — | — | — | — | |
| UnitedHealth Group Inc. | 21.73% | — | — | — | — | — | |
| Cash-Flow-Statement-Based Accruals Ratio, Sector | |||||||
| Health Care Equipment & Services | 8.70% | 11.34% | — | — | — | — | |
| Cash-Flow-Statement-Based Accruals Ratio, Industry | |||||||
| Health Care | 4.25% | 14.62% | — | — | — | — | |
Based on: 10-K (reporting date: 2022-09-30), 10-K (reporting date: 2021-09-30), 10-K (reporting date: 2020-09-30), 10-K (reporting date: 2019-09-30), 10-K (reporting date: 2018-09-30), 10-K (reporting date: 2017-09-30).
1 2022 Calculation
Cash-flow-statement-based accruals ratio = 100 × Cash-flow-statement-based aggregate accruals ÷ Avg. net operating assets
= 100 × -635,831 ÷ [(2,385,917 + 4,721,193) ÷ 2] = -17.89%
2 Click competitor name to see calculations.
The financial data from 2018 to 2022 reveals significant volatility in the relationship between net operating assets and cash-flow-statement-based aggregate accruals. This instability is most pronounced during the 2020 and 2021 fiscal years, where the magnitudes and directions of these values shifted abruptly.
- Net Operating Assets (NOA)
- A fluctuating trend is observed in net operating assets, which decreased from 4,867,634 thousand USD in 2018 to 3,791,904 thousand USD in 2019. The value experienced a sharp decline to a negative 1,317,862 thousand USD in 2020, followed by a recovery to 4,721,193 thousand USD in 2021, and a subsequent decrease to 2,385,917 thousand USD by 2022.
- Cash-Flow-Statement-Based Aggregate Accruals
- Aggregate accruals exhibit extreme variance over the five-year period. Following a positive starting point of 1,358,131 thousand USD in 2018, accruals turned negative in 2019 (-1,112,826 thousand USD) and reached a low of -5,235,885 thousand USD in 2020. A significant reversal occurred in 2021, with accruals rising to 5,014,923 thousand USD, before returning to a negative balance of -635,831 thousand USD in 2022.
- Cash-Flow-Statement-Based Accruals Ratio
- The accruals ratio demonstrates an unstable pattern, mirroring the volatility of its underlying components. The ratio shifted from 34.21% in 2018 to -25.70% in 2019, plummeting to -423.27% in 2020. A sharp spike to 294.71% followed in 2021, before moderating to -17.89% in 2022. These extreme swings, particularly between 2020 and 2021, indicate a highly dynamic reporting environment where non-cash earnings components deviated substantially from operating cash flows relative to the asset base.
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