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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Boeing Co. pages available for free this week:
- Income Statement
- Common-Size Balance Sheet: Assets
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Enterprise Value to EBITDA (EV/EBITDA)
- Enterprise Value to FCFF (EV/FCFF)
- Selected Financial Data since 2005
- Operating Profit Margin since 2005
- Debt to Equity since 2005
- Total Asset Turnover since 2005
- Price to Earnings (P/E) since 2005
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Balance-Sheet-Based Accruals Ratio
Boeing Co., 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 | ||||||
| Less: Short-term and other investments | ||||||
| Operating assets | ||||||
| Operating Liabilities | ||||||
| Total liabilities | ||||||
| Less: Short-term debt and current portion of long-term debt | ||||||
| Less: Long-term debt, excluding current portion | ||||||
| Operating liabilities | ||||||
| Net operating assets1 | ||||||
| Balance-sheet-based aggregate accruals2 | ||||||
| Financial Ratio | ||||||
| Balance-sheet-based accruals ratio3 | ||||||
| Benchmarks | ||||||
| Balance-Sheet-Based Accruals Ratio, Competitors4 | ||||||
| Caterpillar Inc. | ||||||
| Eaton Corp. plc | ||||||
| GE Aerospace | ||||||
| Honeywell International Inc. | ||||||
| Lockheed Martin Corp. | ||||||
| RTX Corp. | ||||||
| Balance-Sheet-Based Accruals Ratio, Sector | ||||||
| Capital Goods | ||||||
| Balance-Sheet-Based Accruals Ratio, Industry | ||||||
| Industrials | ||||||
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 exhibits significant fluctuations over the observed period. Initially negative, the ratio transitions to positive values, indicating a shift in the relationship between net operating assets and aggregate accruals.
- Net Operating Assets
- Net operating assets decreased from US$23,933 million in 2022 to US$19,114 million in 2023, representing a substantial decline. A recovery is then observed, with values increasing to US$23,668 million in 2024 and further to US$30,155 million in 2025. This suggests a period of asset reduction followed by reinvestment or improved asset management.
- Balance-Sheet-Based Aggregate Accruals
- Aggregate accruals are initially negative, at -US$3,079 million in 2022, and become more negative in 2023, reaching -US$4,819 million. This indicates that cash flows from operations were greater than reported earnings during these years. A dramatic reversal occurs in 2024, with accruals turning positive at US$4,554 million, and continuing to increase to US$6,487 million in 2025. This suggests a shift where reported earnings exceeded cash flows from operations.
- Balance-Sheet-Based Accruals Ratio
- The accruals ratio is -12.09% in 2022, indicating that for every dollar of net operating assets, accruals reduced net operating assets by approximately 12.09 cents. The ratio worsens to -22.39% in 2023, suggesting a more pronounced reduction of net operating assets by accruals. A significant positive swing is then observed, with the ratio reaching 21.29% in 2024 and 24.10% in 2025. This indicates that accruals are now increasing net operating assets, and the magnitude of this increase is growing year over year. The substantial change in the ratio warrants further investigation to understand the underlying drivers of accrual reversals.
The observed pattern suggests a potential shift in earnings quality or accounting practices. The movement from negative to positive accruals, coupled with the increasing accruals ratio, could indicate a change in revenue recognition, expense timing, or other accounting policies. Further analysis, including a review of the underlying components of accruals and comparison to industry peers, is recommended.
Cash-Flow-Statement-Based Accruals Ratio
Boeing Co., cash flow statement computation of aggregate accruals
US$ in millions
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| Net earnings (loss) attributable to Boeing shareholders | ||||||
| Less: Net cash provided (used) by operating activities | ||||||
| Less: Net cash (used) provided by investing activities | ||||||
| Cash-flow-statement-based aggregate accruals | ||||||
| Financial Ratio | ||||||
| Cash-flow-statement-based accruals ratio1 | ||||||
| Benchmarks | ||||||
| Cash-Flow-Statement-Based Accruals Ratio, Competitors2 | ||||||
| Caterpillar Inc. | ||||||
| Eaton Corp. plc | ||||||
| GE Aerospace | ||||||
| Honeywell International Inc. | ||||||
| Lockheed Martin Corp. | ||||||
| RTX Corp. | ||||||
| Cash-Flow-Statement-Based Accruals Ratio, Sector | ||||||
| Capital Goods | ||||||
| Cash-Flow-Statement-Based Accruals Ratio, Industry | ||||||
| Industrials | ||||||
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 information presents a fluctuating pattern in net operating assets alongside significant shifts in cash-flow-statement-based aggregate accruals and the resulting accruals ratio over a four-year period. Net operating assets decreased from 2022 to 2023, then increased in both 2024 and 2025, reaching a peak in the final year. The cash-flow-statement-based aggregate accruals demonstrate a marked transition from substantial negative values to positive values during the observed timeframe.
- Cash-Flow-Statement-Based Aggregate Accruals
- Cash-flow-statement-based aggregate accruals were negative in 2022 and 2023, registering at -12,817 million and -5,745 million respectively. This indicates that cash flows from operations were considerably higher than reported net income during these periods, potentially suggesting conservative accounting practices or the liquidation of accruals. A substantial positive shift occurred in 2024, with accruals reaching 12,236 million, followed by a further, though less dramatic, positive value of 671 million in 2025. This suggests a reversal in the relationship between cash flows and reported income, with accruals contributing positively to net income in these later years.
- Cash-Flow-Statement-Based Accruals Ratio
- The accruals ratio mirrors the trend in aggregate accruals. In 2022, the ratio was -50.32%, indicating a significant proportion of reported earnings were non-cash. This ratio improved to -26.69% in 2023, still negative but less pronounced. A substantial increase is observed in 2024, with the ratio reaching 57.20%, signifying a considerable reliance on accruals to generate reported earnings. The ratio decreased significantly in 2025 to 2.49%, suggesting a return to a lower level of accrual influence on reported earnings, though still positive.
The movement from negative to positive accruals and the corresponding changes in the accruals ratio warrant further investigation. The large negative accruals in the initial years could be due to various factors, including working capital management or the recognition of deferred revenue. The subsequent positive accruals and increasing ratio in 2024 require scrutiny to determine if they are sustainable and reflective of underlying business performance, or potentially indicative of earnings management.