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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Exxon Mobil Corp. pages available for free this week:
- Statement of Comprehensive Income
- Balance Sheet: Liabilities and Stockholders’ Equity
- Common-Size Balance Sheet: Assets
- Analysis of Geographic Areas
- Enterprise Value to EBITDA (EV/EBITDA)
- Dividend Discount Model (DDM)
- Return on Assets (ROA) since 2005
- Current Ratio since 2005
- Total Asset Turnover since 2005
- Price to Book Value (P/BV) since 2005
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Balance-Sheet-Based Accruals Ratio
Exxon Mobil Corp., 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: Notes and loans payable | ||||||
| Less: Long-term debt, excluding due 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 | ||||||
| Chevron Corp. | ||||||
| ConocoPhillips | ||||||
| Occidental Petroleum Corp. | ||||||
| Balance-Sheet-Based Accruals Ratio, Sector | ||||||
| Oil, Gas & Consumable Fuels | ||||||
| Balance-Sheet-Based Accruals Ratio, Industry | ||||||
| Energy | ||||||
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.
- Net Operating Assets
- The value of net operating assets exhibited a relatively stable trend from 2021 through 2023, with a slight decline from 216,585 million USD in 2021 to 214,026 million USD in 2022, followed by a moderate increase to 222,572 million USD in 2023. A significant increase occurred in 2024, where the net operating assets rose sharply to 289,287 million USD, indicating considerable expansion in operating asset base during this period.
- Balance-Sheet-Based Aggregate Accruals
- The aggregate accruals showed substantial fluctuation over the four-year period. In 2021, accruals were negative at -10,821 million USD, indicating a possible conservative recognition of earnings or reduction in accrued liabilities. In 2022, the negative accrual figure narrowed substantially to -2,559 million USD, suggesting less conservative or more accrual-driven earnings. The trend reversed in 2023 with positive accruals of 8,546 million USD, shifting from negative to positive accruals which may reflect a change in earnings recognition or accounting policies. A pronounced increase was observed in 2024, with aggregate accruals reaching 66,715 million USD, reflecting a sharp rise in accrual-based earnings or liabilities.
- Balance-Sheet-Based Accruals Ratio
- The accruals ratio followed a pattern similar to aggregate accruals but expressed in relative terms. Starting at -4.87% in 2021, the ratio improved to -1.19% in 2022, indicating decreasing proportion of accruals relative to net operating assets. It moved into positive territory at 3.91% in 2023, marking an important shift in accrual accounting toward an accrual-driven earnings recognition. The ratio then escalated dramatically to 26.07% in 2024, signaling a substantial increase in accruals proportionate to net operating assets, which warrants scrutiny for potential implications on earnings quality or underlying operational performance.
Cash-Flow-Statement-Based Accruals Ratio
Exxon Mobil Corp., 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 ExxonMobil | ||||||
| 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 | ||||||
| Chevron Corp. | ||||||
| ConocoPhillips | ||||||
| Occidental Petroleum Corp. | ||||||
| Cash-Flow-Statement-Based Accruals Ratio, Sector | ||||||
| Oil, Gas & Consumable Fuels | ||||||
| Cash-Flow-Statement-Based Accruals Ratio, Industry | ||||||
| Energy | ||||||
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 demonstrate an overall increasing trend over the four-year period. Starting at 216,585 million US dollars at the end of 2021, the figure slightly declined to 214,026 million in 2022, then increased to 222,572 million in 2023, followed by a more significant rise to 289,287 million in 2024. This indicates a strengthening asset base in recent years, particularly in the last year analyzed.
- Cash-flow-statement-based aggregate accruals
- The aggregate accruals show a consistent improvement trend over the four years. The value, initially at -14,854 million US dollars in 2021, moved upward to -6,315 million in 2022, then further approached near zero at -85 million in 2023, followed by a slight decline to -1,404 million in 2024. The reduction in the magnitude of negative accruals suggests a movement toward reduced accrual-based adjustments and potentially improved earnings quality.
- Cash-flow-statement-based accruals ratio
- This ratio reflects a parallel trend to the aggregate accruals in percentage terms. Starting from -6.69% in 2021, it climbs steadily to -2.93% in 2022, nearly zero at -0.04% in 2023, then slightly declines to -0.55% in 2024. The decreasing absolute values indicate diminishing reliance on accruals relative to cash flows, which generally signals improving financial reporting quality.