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
Dell Technologies Inc., balance sheet computation of aggregate accruals
US$ in millions
| Jan 30, 2026 | Jan 31, 2025 | Feb 2, 2024 | Feb 3, 2023 | Jan 28, 2022 | Jan 29, 2021 | ||
|---|---|---|---|---|---|---|---|
| Operating Assets | |||||||
| Total assets | 101,286) | 79,746) | 82,089) | 89,611) | 92,735) | 123,415) | |
| Less: Cash and cash equivalents | 11,528) | 3,633) | 7,366) | 8,607) | 9,477) | 14,201) | |
| Operating assets | 89,758) | 76,113) | 74,723) | 81,004) | 83,258) | 109,214) | |
| Operating Liabilities | |||||||
| Total liabilities | 103,756) | 81,133) | 84,398) | 92,636) | 94,315) | 115,390) | |
| Less: Short-term debt | 7,990) | 5,204) | 6,982) | 6,573) | 5,823) | 6,362) | |
| Less: Long-term debt | 23,513) | 19,363) | 19,012) | 23,015) | 21,131) | 41,622) | |
| Operating liabilities | 72,253) | 56,566) | 58,404) | 63,048) | 67,361) | 67,406) | |
| Net operating assets1 | 17,505) | 19,547) | 16,319) | 17,956) | 15,897) | 41,808) | |
| Balance-sheet-based aggregate accruals2 | (2,042) | 3,228) | (1,637) | 2,059) | (25,911) | —) | |
| Financial Ratio | |||||||
| Balance-sheet-based accruals ratio3 | -11.02% | 18.00% | -9.55% | 12.16% | -89.81% | — | |
| Benchmarks | |||||||
| Balance-Sheet-Based Accruals Ratio, Competitors4 | |||||||
| Apple Inc. | — | 17.98% | -12.64% | -9.04% | -2.12% | 36.09% | |
| Arista Networks Inc. | — | -3.85% | -26.64% | 17.14% | 106.22% | — | |
| Cisco Systems Inc. | — | 0.44% | 75.07% | -12.09% | 5.96% | 20.24% | |
| Super Micro Computer Inc. | — | -0.54% | 105.88% | 3.74% | 58.35% | 8.42% | |
| Balance-Sheet-Based Accruals Ratio, Sector | |||||||
| Technology Hardware & Equipment | 0.00% | 11.90% | 11.96% | -6.96% | -13.35% | — | |
| Balance-Sheet-Based Accruals Ratio, Industry | |||||||
| Information Technology | 0.00% | 14.51% | 21.35% | 8.92% | 18.19% | — | |
Based on: 10-K (reporting date: 2026-01-30), 10-K (reporting date: 2025-01-31), 10-K (reporting date: 2024-02-02), 10-K (reporting date: 2023-02-03), 10-K (reporting date: 2022-01-28), 10-K (reporting date: 2021-01-29).
1 2026 Calculation
Net operating assets = Operating assets – Operating liabilities
= 89,758 – 72,253 = 17,505
2 2026 Calculation
Balance-sheet-based aggregate accruals = Net operating assets2026 – Net operating assets2025
= 17,505 – 19,547 = -2,042
3 2026 Calculation
Balance-sheet-based accruals ratio = 100 × Balance-sheet-based aggregate accruals ÷ Avg. net operating assets
= 100 × -2,042 ÷ [(17,505 + 19,547) ÷ 2] = -11.02%
4 Click competitor name to see calculations.
The information presents a fluctuating pattern in balance-sheet-based accruals and the corresponding ratio over a five-year period. Net operating assets demonstrate an overall increasing trend, though with some yearly variation. Aggregate accruals, however, exhibit significant volatility, shifting from substantial negative values to positive figures and back again. This volatility is reflected in the balance-sheet-based accruals ratio, which experiences large swings.
- Net Operating Assets
- Net operating assets increased from US$15,897 million in 2022 to US$17,956 million in 2023, representing a notable rise. A subsequent decrease to US$16,319 million occurred in 2024, followed by a further increase to US$19,547 million in 2025. The final year observed, 2026, shows a decline to US$17,505 million. This suggests a generally upward trajectory with intermediate fluctuations.
- Balance-Sheet-Based Aggregate Accruals
- In 2022, balance-sheet-based aggregate accruals were significantly negative, registering at US$-25,911 million. A dramatic reversal occurred in 2023, with accruals becoming positive at US$2,059 million. This positive trend did not persist, as accruals turned negative again in 2024, reaching US$-1,637 million. A further positive shift occurred in 2025, with accruals at US$3,228 million, before declining to US$-2,042 million in 2026. The substantial fluctuations indicate considerable changes in the timing of cash flows relative to reported earnings.
- Balance-Sheet-Based Accruals Ratio
- The balance-sheet-based accruals ratio mirrored the volatility of the aggregate accruals. It began at -89.81% in 2022, indicating substantial negative accruals relative to net operating assets. The ratio improved significantly to 12.16% in 2023, then decreased to -9.55% in 2024. A substantial increase to 18.00% was observed in 2025, followed by a decline to -11.02% in 2026. The large percentage swings suggest a potentially inconsistent relationship between reported earnings and underlying cash flows, warranting further investigation into the drivers of these accruals.
The observed pattern of negative accruals followed by positive accruals, and vice versa, could indicate cyclicality in the business or potentially aggressive accounting practices. The magnitude of the fluctuations, particularly the -89.81% ratio in 2022, is noteworthy and may require deeper scrutiny to assess the quality of earnings.
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Cash-Flow-Statement-Based Accruals Ratio
Dell Technologies Inc., cash flow statement computation of aggregate accruals
US$ in millions
| Jan 30, 2026 | Jan 31, 2025 | Feb 2, 2024 | Feb 3, 2023 | Jan 28, 2022 | Jan 29, 2021 | ||
|---|---|---|---|---|---|---|---|
| Net income attributable to Dell Technologies Inc. | 5,936) | 4,592) | 3,211) | 2,442) | 5,563) | 3,250) | |
| Less: Change in cash from operating activities | 11,185) | 4,521) | 8,676) | 3,565) | 10,307) | 11,407) | |
| Less: Change in cash from investing activities | (2,055) | (2,215) | (2,783) | (3,024) | 1,306) | (460) | |
| Cash-flow-statement-based aggregate accruals | (3,194) | 2,286) | (2,682) | 1,901) | (6,050) | (7,697) | |
| Financial Ratio | |||||||
| Cash-flow-statement-based accruals ratio1 | -17.24% | 12.75% | -15.65% | 11.23% | -20.97% | — | |
| Benchmarks | |||||||
| Cash-Flow-Statement-Based Accruals Ratio, Competitors2 | |||||||
| Apple Inc. | — | -13.44% | -25.90% | -14.62% | 0.00% | 4.86% | |
| Arista Networks Inc. | — | 163.65% | 82.06% | 36.37% | 52.90% | — | |
| Cisco Systems Inc. | — | -9.79% | 46.78% | -7.65% | -10.18% | 1.64% | |
| Super Micro Computer Inc. | — | -7.24% | 98.99% | 0.89% | 56.84% | 5.08% | |
| Cash-Flow-Statement-Based Accruals Ratio, Sector | |||||||
| Technology Hardware & Equipment | 0.00% | -8.19% | -2.79% | -10.03% | -4.10% | — | |
| Cash-Flow-Statement-Based Accruals Ratio, Industry | |||||||
| Information Technology | 0.00% | 6.09% | 6.25% | 1.40% | 2.99% | — | |
Based on: 10-K (reporting date: 2026-01-30), 10-K (reporting date: 2025-01-31), 10-K (reporting date: 2024-02-02), 10-K (reporting date: 2023-02-03), 10-K (reporting date: 2022-01-28), 10-K (reporting date: 2021-01-29).
1 2026 Calculation
Cash-flow-statement-based accruals ratio = 100 × Cash-flow-statement-based aggregate accruals ÷ Avg. net operating assets
= 100 × -3,194 ÷ [(17,505 + 19,547) ÷ 2] = -17.24%
2 Click competitor name to see calculations.
The relationship between net operating assets and cash-flow-statement-based accruals exhibits considerable fluctuation over the observed period. Net operating assets generally increased between 2022 and 2025, before decreasing in the final observed year. Accruals, however, demonstrate a more volatile pattern, shifting from negative to positive values and back again.
- Cash-Flow-Statement-Based Accruals Ratio
- The cash-flow-statement-based accruals ratio experienced a significant swing from -20.97% in 2022 to 11.23% in 2023. This represents a substantial improvement, indicating a reduction in the reliance on accruals to support reported earnings. However, this positive trend was reversed in 2024, with the ratio declining to -15.65%. A subsequent increase to 12.75% occurred in 2025, followed by a further decline to -17.24% in 2026. This pattern suggests potential inconsistencies in the relationship between operating cash flows and reported earnings.
- The negative accruals ratios in 2022, 2024, and 2026 suggest that operating cash flow exceeded net income during those periods. Conversely, the positive ratios in 2023 and 2025 indicate that net income exceeded operating cash flow. The magnitude of these fluctuations warrants further investigation to determine the underlying drivers and assess the quality of earnings.
The observed volatility in the accruals ratio may indicate aggressive revenue recognition practices, delayed expense recognition, or other accounting choices that impact the timing of reported earnings. The shift between negative and positive accruals ratios could also be influenced by changes in working capital management or other operational factors. Continued monitoring of this ratio, alongside other financial metrics, is recommended to gain a more comprehensive understanding of the company’s financial reporting quality.
The interplay between net operating assets and accruals suggests a dynamic financial environment. While increases in net operating assets are generally positive, the fluctuating accruals ratio introduces a degree of uncertainty regarding the sustainability and quality of those increases.
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