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.
Paying user area
Try for free
Boston Scientific Corp. pages available for free this week:
- Common-Size Balance Sheet: Assets
- Analysis of Liquidity Ratios
- Analysis of Short-term (Operating) Activity Ratios
- Analysis of Long-term (Investment) Activity Ratios
- Common Stock Valuation Ratios
- Enterprise Value (EV)
- Capital Asset Pricing Model (CAPM)
- Operating Profit Margin since 2005
- Current Ratio since 2005
- Analysis of Revenues
The data is hidden behind: . Unhide it.
Get full access to the entire website from $10.42/mo, or
get 1-month access to Boston Scientific Corp. for $22.49.
This is a one-time payment. There is no automatic renewal.
We accept:
Balance-Sheet-Based Accruals Ratio
Boston Scientific Corp., balance sheet computation of aggregate accruals
US$ in millions
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Operating Assets | ||||||
| Total assets | ||||||
| Less: Cash and cash equivalents | ||||||
| Operating assets | ||||||
| Operating Liabilities | ||||||
| Total liabilities | ||||||
| Less: Current debt obligations | ||||||
| Less: Long-term debt | ||||||
| Operating liabilities | ||||||
| Net operating assets1 | ||||||
| Balance-sheet-based aggregate accruals2 | ||||||
| Financial Ratio | ||||||
| Balance-sheet-based accruals ratio3 | ||||||
| Benchmarks | ||||||
| Balance-Sheet-Based Accruals Ratio, Competitors4 | ||||||
| Abbott Laboratories | ||||||
| CVS Health Corp. | ||||||
| Elevance Health Inc. | ||||||
| Intuitive Surgical Inc. | ||||||
| Medtronic PLC | ||||||
| UnitedHealth Group Inc. | ||||||
| Balance-Sheet-Based Accruals Ratio, Sector | ||||||
| Health Care Equipment & Services | ||||||
| Balance-Sheet-Based Accruals Ratio, Industry | ||||||
| Health Care | ||||||
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Net operating assets = Operating assets – Operating liabilities
= – =
2 2022 Calculation
Balance-sheet-based aggregate accruals = Net operating assets2022 – Net operating assets2021
= – =
3 2022 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.
- Net operating assets
- The net operating assets exhibited a fluctuating trend over the analyzed period. Starting at 23,668 million US dollars at the end of 2019, there was a slight decrease to 22,735 million in 2020. This was followed by a recovery to 23,761 million in 2021, and a more significant increase to 25,580 million by the end of 2022. Overall, the data reflects a gradual upward trajectory in net operating assets across the four years.
- Balance-sheet-based aggregate accruals
- The balance-sheet-based aggregate accruals displayed notable volatility. In 2019, the figure was at a high of 8,032 million US dollars, but it turned sharply negative in 2020, reaching -933 million. The subsequent years showed a positive recovery, with accruals increasing to 1,026 million in 2021 and further to 1,819 million in 2022. This pattern indicates a significant reversal from a negative accrual position in 2020 to moderate positive levels afterward.
- Balance-sheet-based accruals ratio
- The accruals ratio, expressed as a percentage, followed a pattern consistent with the aggregate accruals. Starting at 40.87% in 2019, it dropped substantially to a negative value of -4.02% in 2020. The metric then rose to positive values of 4.41% and 7.37% in 2021 and 2022 respectively. This progression demonstrates a marked decline in 2020 followed by gradual normalization and improvement in subsequent years.
Cash-Flow-Statement-Based Accruals Ratio
Boston Scientific Corp., cash flow statement computation of aggregate accruals
US$ in millions
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Net income (loss) | ||||||
| Less: Cash provided by operating activities | ||||||
| Less: Cash used for investing activities | ||||||
| Cash-flow-statement-based aggregate accruals | ||||||
| Financial Ratio | ||||||
| Cash-flow-statement-based accruals ratio1 | ||||||
| Benchmarks | ||||||
| Cash-Flow-Statement-Based Accruals Ratio, Competitors2 | ||||||
| Abbott Laboratories | ||||||
| CVS Health Corp. | ||||||
| Elevance Health Inc. | ||||||
| Intuitive Surgical Inc. | ||||||
| Medtronic PLC | ||||||
| UnitedHealth Group Inc. | ||||||
| Cash-Flow-Statement-Based Accruals Ratio, Sector | ||||||
| Health Care Equipment & Services | ||||||
| Cash-Flow-Statement-Based Accruals Ratio, Industry | ||||||
| Health Care | ||||||
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 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.
Over the four-year period ending December 31, 2022, there are notable trends in the financial reporting quality measures. Net operating assets exhibited a fluctuating but overall increasing trend, starting at 23,668 million US dollars in 2019, slightly declining to 22,735 million in 2020, then rising to 23,761 million in 2021, followed by a more pronounced increase to 25,580 million in 2022. This indicates an expansion in the company's net operating asset base over the most recent year.
The cash-flow-statement-based aggregate accruals demonstrated a volatile pattern. In 2019, accruals were significantly positive at 7,905 million US dollars, which then sharply reversed to a negative figure of -1,179 million in 2020. This was followed by moderate positive accruals in 2021 and 2022, measured at 768 million and 1,183 million, respectively. This volatility suggests changes in the recognition and measurement of non-cash items affecting operational cash flow during the period, potentially impacting earnings quality.
Regarding the cash-flow-statement-based accruals ratio, the percentage values further reflect this variability. The ratio was markedly high at 40.22% in 2019, indicating a substantial level of accruals relative to net operating assets. A significant decrease occurred in 2020, with the ratio turning negative at -5.08%, which corresponds with the negative aggregate accruals observed in the same year. The ratio then recovered in 2021 and 2022 to moderate levels of 3.3% and 4.8%, respectively, suggesting a stabilization of accruals relative to net operating assets.
In summary, the data reveals an increasing trend in net operating assets alongside considerable fluctuations in accrual measures, with a peak in accrual intensity in 2019, a trough in 2020, and a partial recovery in the subsequent two years. These patterns indicate evolving financial reporting dynamics and potential impacts on earnings quality over the analyzed period.