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:
- Balance Sheet: Assets
- Common-Size Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Liquidity Ratios
- Analysis of Reportable Segments
- Analysis of Geographic Areas
- Common Stock Valuation Ratios
- Enterprise Value to EBITDA (EV/EBITDA)
- Dividend Discount Model (DDM)
- Net Profit Margin since 2005
- Total Asset Turnover 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, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| 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 | ||||||
| Balance-Sheet-Based Accruals Ratio, Sector | ||||||
| Oil, Gas & Consumable Fuels | ||||||
| Balance-Sheet-Based Accruals Ratio, Industry | ||||||
| Energy | ||||||
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. Net operating assets demonstrate a consistent upward trend, while aggregate accruals and the resulting accruals ratio display considerable volatility.
- Net Operating Assets
- Net operating assets increased from US$214,026 million in 2022 to US$299,482 million in 2025, representing a cumulative growth of approximately 39.9%. The growth rate appears to be accelerating, with larger increases observed between 2023 and 2024 compared to 2022 and 2023.
- Balance-Sheet-Based Aggregate Accruals
- Aggregate accruals were negative in 2022, at -US$2,559 million, indicating a reduction in operating assets financed by current liabilities or an increase in operating assets financed by equity. A substantial positive shift occurred in 2023, with accruals reaching US$8,546 million. This trend continued dramatically in 2024, reaching US$66,715 million, before decreasing to US$10,195 million in 2025. This pattern suggests a significant, but potentially unsustainable, reliance on accruals to support reported earnings in 2024.
- Balance-Sheet-Based Accruals Ratio
- The accruals ratio mirrored the trend in aggregate accruals. It began at -1.19% in 2022, shifted to 3.91% in 2023, peaked at 26.07% in 2024, and then declined to 3.46% in 2025. The substantial increase to 26.07% in 2024 warrants further investigation, as a ratio of this magnitude may indicate aggressive accounting practices or potential earnings manipulation. The subsequent decrease in 2025, while positive, does not fully negate the concerns raised by the 2024 value. The negative ratio in 2022 suggests that operating cash flows were sufficient to fund asset growth without significant reliance on accruals.
The divergence between the increasing net operating assets and the fluctuating accruals ratio suggests a complex relationship between asset growth and earnings quality. The significant increase in the accruals ratio in 2024, followed by a decrease in 2025, requires further scrutiny to determine the underlying drivers and assess the sustainability of reported earnings.
Cash-Flow-Statement-Based Accruals Ratio
Exxon Mobil Corp., cash flow statement computation of aggregate accruals
US$ in millions
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| Net income 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 | ||||||
| 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: 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 analysis reveals a shifting pattern in cash-flow-statement-based accruals over the four-year period. Net operating assets demonstrate a consistent upward trajectory, while the cash-flow-statement-based aggregate accruals and accruals ratio exhibit considerable fluctuation.
- Net Operating Assets
- Net operating assets increased from US$214,026 million in 2022 to US$299,482 million in 2025. This represents a cumulative increase of approximately 39.9% over the period, indicating substantial growth in the company’s operational asset base.
- Cash-Flow-Statement-Based Aggregate Accruals
- Cash-flow-statement-based aggregate accruals were negative in 2022 and 2023, at -US$6,315 million and -US$85 million respectively. This suggests that, during these years, the company’s reported earnings were higher than its actual cash flows from operations. In 2024, accruals became less negative, reaching -US$1,404 million, before turning positive in 2025 at US$2,801 million. This shift indicates a move towards earnings being more closely aligned with cash flows, and ultimately, cash flows exceeding reported earnings in the final year of the period.
- Cash-Flow-Statement-Based Accruals Ratio
- The accruals ratio mirrors the trend in aggregate accruals. It began at -2.93% in 2022, indicating a significant difference between reported earnings and cash flows. The ratio improved substantially to -0.04% in 2023, and further to -0.55% in 2024, suggesting a decreasing reliance on accruals to support reported income. By 2025, the ratio had become positive at 0.95%, signifying that accruals contributed positively to earnings, and that earnings were supported by cash flows.
The substantial change from negative to positive accruals and the corresponding shift in the accruals ratio warrants further investigation. While a positive accruals ratio is not inherently negative, the magnitude of the change should be examined in the context of the company’s industry, business model, and accounting policies. The initial negative accruals could indicate conservative revenue recognition or aggressive expense deferral, while the subsequent positive accruals might suggest a reversal of these practices or changes in working capital management.