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
General Motors Co., 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 | 281,284) | 279,761) | 273,064) | 264,037) | 244,718) | |
| Less: Cash and cash equivalents | 20,945) | 19,872) | 18,853) | 19,153) | 20,067) | |
| Less: Marketable debt securities | 6,724) | 7,265) | 7,613) | 12,150) | 8,609) | |
| Operating assets | 253,615) | 252,624) | 246,598) | 232,734) | 216,042) | |
| Operating Liabilities | ||||||
| Total liabilities | 218,116) | 214,171) | 204,757) | 191,752) | 178,903) | |
| Less: Short-term debt and current portion of long-term debt | 35,668) | 39,432) | 38,968) | 38,778) | 33,720) | |
| Less: Long-term debt, excluding current portion | 94,609) | 90,300) | 82,773) | 75,921) | 75,659) | |
| Operating liabilities | 87,839) | 84,439) | 83,016) | 77,053) | 69,524) | |
| Net operating assets1 | 165,776) | 168,185) | 163,582) | 155,681) | 146,518) | |
| Balance-sheet-based aggregate accruals2 | (2,409) | 4,603) | 7,901) | 9,163) | —) | |
| Financial Ratio | ||||||
| Balance-sheet-based accruals ratio3 | -1.44% | 2.77% | 4.95% | 6.06% | — | |
| Benchmarks | ||||||
| Balance-Sheet-Based Accruals Ratio, Competitors4 | ||||||
| Ford Motor Co. | -2.58% | 8.31% | 9.51% | 0.69% | — | |
| Tesla Inc. | 4.00% | 13.13% | 38.86% | 25.68% | — | |
| Balance-Sheet-Based Accruals Ratio, Sector | ||||||
| Automobiles & Components | -1.27% | 6.37% | 10.25% | 5.19% | — | |
| Balance-Sheet-Based Accruals Ratio, Industry | ||||||
| Consumer Discretionary | 16.70% | 12.07% | 12.01% | 13.04% | — | |
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
= 253,615 – 87,839 = 165,776
2 2025 Calculation
Balance-sheet-based aggregate accruals = Net operating assets2025 – Net operating assets2024
= 165,776 – 168,185 = -2,409
3 2025 Calculation
Balance-sheet-based accruals ratio = 100 × Balance-sheet-based aggregate accruals ÷ Avg. net operating assets
= 100 × -2,409 ÷ [(165,776 + 168,185) ÷ 2] = -1.44%
4 Click competitor name to see calculations.
The information presents a review of net operating assets, aggregate accruals, and the resulting accruals ratio over a four-year period. Net operating assets demonstrate a general increasing trend, though with a slight decrease in the final year. Aggregate accruals, however, exhibit a distinct downward trajectory, culminating in a negative value. Consequently, the balance-sheet-based accruals ratio reflects this pattern, declining steadily and becoming negative in the last reported year.
- Net Operating Assets
- Net operating assets increased from US$155,681 million in 2022 to US$163,582 million in 2023, representing growth of approximately 4.7%. Further growth was observed through 2024, reaching US$168,185 million. A modest decrease occurred in 2025, with net operating assets reported at US$165,776 million. This suggests a period of overall asset expansion, with a slight contraction in the most recent year.
- Balance-Sheet-Based Aggregate Accruals
- Aggregate accruals decreased consistently throughout the period. Starting at US$9,163 million in 2022, they declined to US$7,901 million in 2023, then to US$4,603 million in 2024. Notably, accruals became negative in 2025, reaching -US$2,409 million. This indicates a shift from accruals contributing to reported earnings to accruals detracting from earnings.
- Balance-Sheet-Based Accruals Ratio
- The accruals ratio mirrors the trend in aggregate accruals. It decreased from 6.06% in 2022 to 4.95% in 2023, and further to 2.77% in 2024. The ratio turned negative in 2025, reaching -1.44%. A declining accruals ratio often suggests decreasing reliance on accrual accounting to generate reported earnings, and a negative ratio indicates that cash flows are exceeding reported earnings. This shift warrants further investigation to understand the underlying drivers.
The combined trends suggest a potential change in the company’s earnings quality profile. While net operating assets continue to grow, the decreasing and ultimately negative accruals ratio indicates a diminishing role of accruals in contributing to reported income. This could be due to improved cash flow generation, more conservative accounting practices, or other operational changes. Further analysis is recommended to determine the specific factors driving these trends and their implications for future financial performance.
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Cash-Flow-Statement-Based Accruals Ratio
General Motors Co., cash flow statement computation of aggregate accruals
US$ in millions
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| Net income attributable to stockholders | 2,697) | 6,008) | 10,127) | 9,934) | 10,019) | |
| Less: Net cash provided by operating activities | 26,867) | 20,129) | 20,930) | 16,043) | 15,188) | |
| Less: Net cash used in investing activities | (16,134) | (20,517) | (14,663) | (17,882) | (16,355) | |
| Cash-flow-statement-based aggregate accruals | (8,036) | 6,396) | 3,860) | 11,773) | 11,186) | |
| Financial Ratio | ||||||
| Cash-flow-statement-based accruals ratio1 | -4.81% | 3.86% | 2.42% | 7.79% | — | |
| Benchmarks | ||||||
| Cash-Flow-Statement-Based Accruals Ratio, Competitors2 | ||||||
| Ford Motor Co. | -7.01% | 9.36% | 4.87% | -3.26% | — | |
| Tesla Inc. | 9.78% | 25.75% | 52.06% | 41.27% | — | |
| Cash-Flow-Statement-Based Accruals Ratio, Sector | ||||||
| Automobiles & Components | -3.97% | 8.77% | 8.36% | 5.47% | — | |
| Cash-Flow-Statement-Based Accruals Ratio, Industry | ||||||
| Consumer Discretionary | 9.87% | 9.43% | 4.25% | 1.57% | — | |
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 × -8,036 ÷ [(165,776 + 168,185) ÷ 2] = -4.81%
2 Click competitor name to see calculations.
The reported net operating assets exhibited a generally increasing trend over the observed period, rising from US$155,681 million in 2022 to US$168,185 million in 2024 before decreasing slightly to US$165,776 million in 2025. However, the cash-flow-statement-based aggregate accruals and the corresponding accruals ratio demonstrate significant fluctuations.
- Cash-Flow-Statement-Based Aggregate Accruals
- Cash-flow-statement-based aggregate accruals decreased substantially from US$11,773 million in 2022 to US$3,860 million in 2023. A moderate increase was then observed in 2024, with accruals reaching US$6,396 million. Notably, 2025 saw a significant shift, with accruals becoming negative at US$-8,036 million. This indicates a substantial reduction in accruals relative to cash flows during that year.
- Cash-Flow-Statement-Based Accruals Ratio
- The cash-flow-statement-based accruals ratio mirrored the trend in aggregate accruals. It declined from 7.79% in 2022 to 2.42% in 2023, then increased to 3.86% in 2024. The most pronounced change occurred in 2025, with the ratio falling to -4.81%. This negative value suggests that cash flows exceeded accruals during the period, potentially indicating a reversal of previously recognized accruals or a strong generation of cash from operations relative to reported earnings.
The volatility in the accruals ratio warrants further investigation. While a declining ratio could suggest improved earnings quality, the negative value in 2025 requires scrutiny to determine the underlying drivers. Potential explanations include changes in working capital management, aggressive revenue recognition policies in prior periods being corrected, or a significant improvement in cash conversion cycles. The shift from positive to negative accruals in the final year is a key area for deeper analysis.
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