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
ExxonMobil Holdings 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 | 448,980) | 453,475) | 376,317) | 369,067) | 338,923) | |
| Less: Cash and cash equivalents | 10,681) | 23,029) | 31,539) | 29,640) | 6,802) | |
| Operating assets | 438,299) | 430,446) | 344,778) | 339,427) | 332,121) | |
| Operating Liabilities | ||||||
| Total liabilities | 182,354) | 182,869) | 163,779) | 166,594) | 163,240) | |
| Less: Notes and loans payable | 9,296) | 4,955) | 4,090) | 634) | 4,276) | |
| Less: Long-term debt, excluding due within one year | 34,241) | 36,755) | 37,483) | 40,559) | 43,428) | |
| Operating liabilities | 138,817) | 141,159) | 122,206) | 125,401) | 115,536) | |
| Net operating assets1 | 299,482) | 289,287) | 222,572) | 214,026) | 216,585) | |
| Balance-sheet-based aggregate accruals2 | 10,195) | 66,715) | 8,546) | (2,559) | —) | |
| Financial Ratio | ||||||
| Balance-sheet-based accruals ratio3 | 3.46% | 26.07% | 3.91% | -1.19% | — | |
| Benchmarks | ||||||
| Balance-Sheet-Based Accruals Ratio, Competitors4 | ||||||
| Chevron Corp. | 28.03% | -2.10% | 5.21% | 0.03% | — | |
| ConocoPhillips | -2.51% | 29.59% | 10.61% | -5.86% | — | |
| Balance-Sheet-Based Accruals Ratio, Sector | ||||||
| Oil, Gas & Consumable Fuels | 11.10% | 16.86% | 5.28% | -1.34% | — | |
| Balance-Sheet-Based Accruals Ratio, Industry | ||||||
| Energy | 11.33% | 16.00% | 5.39% | -1.05% | — | |
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
= 438,299 – 138,817 = 299,482
2 2025 Calculation
Balance-sheet-based aggregate accruals = Net operating assets2025 – Net operating assets2024
= 299,482 – 289,287 = 10,195
3 2025 Calculation
Balance-sheet-based accruals ratio = 100 × Balance-sheet-based aggregate accruals ÷ Avg. net operating assets
= 100 × 10,195 ÷ [(299,482 + 289,287) ÷ 2] = 3.46%
4 Click competitor name to see calculations.
An analysis of balance-sheet-based accruals reveals a period of significant volatility in financial reporting quality between 2022 and 2025, characterized by a substantial spike in accruals during the 2024 fiscal year followed by a sharp correction in 2025.
- Net Operating Assets Growth
- A consistent upward trajectory in net operating assets is observed, increasing from US$ 214,026 million in 2022 to US$ 299,482 million by 2025. The most pronounced expansion occurred between 2023 and 2024, where assets grew by approximately US$ 66,715 million, indicating a significant increase in the company's operational investment base.
- Aggregate Accruals Volatility
- Balance-sheet-based aggregate accruals shifted from a negative position of US$ -2,559 million in 2022 to a peak of US$ 66,715 million in 2024. This movement suggests a dramatic increase in the gap between reported accounting earnings and actual cash flows during the 2024 period. By the end of 2025, aggregate accruals decreased substantially to US$ 10,195 million, suggesting a reversal or normalization of the prior year's adjustments.
- Balance-Sheet-Based Accruals Ratio Analysis
- The accruals ratio demonstrates extreme fluctuation, moving from -1.19% in 2022 to 3.91% in 2023, before surging to 26.07% in 2024. A ratio of this magnitude typically indicates that a large portion of the reported earnings is comprised of non-cash accruals, which can be a signal of lower earnings quality or the impact of significant one-time accounting adjustments. The subsequent decline to 3.46% in 2025 indicates a return to more conservative reporting levels and a reduction in the reliance on accruals relative to the asset base.
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Cash-Flow-Statement-Based Accruals Ratio
ExxonMobil Holdings 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 | 28,844) | 33,680) | 36,010) | 55,740) | 23,040) | |
| Less: Net cash provided by operating activities | 51,970) | 55,022) | 55,369) | 76,797) | 48,129) | |
| Less: Net cash used in investing activities | (25,927) | (19,938) | (19,274) | (14,742) | (10,235) | |
| Cash-flow-statement-based aggregate accruals | 2,801) | (1,404) | (85) | (6,315) | (14,854) | |
| Financial Ratio | ||||||
| Cash-flow-statement-based accruals ratio1 | 0.95% | -0.55% | -0.04% | -2.93% | — | |
| Benchmarks | ||||||
| Cash-Flow-Statement-Based Accruals Ratio, Competitors2 | ||||||
| Chevron Corp. | -2.88% | -2.83% | 0.58% | -1.22% | — | |
| ConocoPhillips | -3.63% | 0.37% | 5.11% | -1.56% | — | |
| Cash-Flow-Statement-Based Accruals Ratio, Sector | ||||||
| Oil, Gas & Consumable Fuels | -1.03% | -1.20% | 0.87% | -2.11% | — | |
| Cash-Flow-Statement-Based Accruals Ratio, Industry | ||||||
| Energy | -1.25% | -0.95% | 0.89% | -1.75% | — | |
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 × 2,801 ÷ [(299,482 + 289,287) ÷ 2] = 0.95%
2 Click competitor name to see calculations.
Analysis of the cash-flow-statement-based accruals indicates a transition in the relationship between earnings and cash flows relative to net operating assets over the four-year period. While net operating assets expanded steadily, the accruals ratio shifted from significantly negative values to a positive position by the end of the period.
- Net Operating Assets Trend
- A consistent upward trajectory in net operating assets is observed, increasing from 214,026 million US dollars in 2022 to 299,482 million US dollars in 2025. A notable acceleration in asset growth occurred between 2023 and 2024, with a substantial increase of approximately 66,715 million US dollars during that interval.
- Aggregate Accruals Volatility
- Cash-flow-statement-based aggregate accruals exhibited significant volatility. The period began with a substantial negative accrual of -6,315 million US dollars in 2022, which narrowed significantly to -85 million US dollars in 2023. Following a further negative turn to -1,404 million US dollars in 2024, the figure shifted to a positive 2,801 million US dollars in 2025.
- Accruals Ratio Interpretation
- The accruals ratio moved from -2.93% in 2022 to 0.95% in 2025. The negative ratios maintained from 2022 through 2024 suggest that cash flow from operations exceeded accrual-based earnings, which is typically associated with high earnings quality. The transition to a positive ratio in 2025 indicates a reversal of this trend, where accrual-based earnings began to exceed cash flows relative to the asset base.
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