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
Oracle Corp., balance sheet computation of aggregate accruals
US$ in millions
| May 31, 2026 | May 31, 2025 | May 31, 2024 | May 31, 2023 | May 31, 2022 | May 31, 2021 | ||
|---|---|---|---|---|---|---|---|
| Operating Assets | |||||||
| Total assets | 261,759) | 168,361) | 140,976) | 134,384) | 109,297) | 131,107) | |
| Less: Cash and cash equivalents | 31,289) | 10,786) | 10,454) | 9,765) | 21,383) | 30,098) | |
| Less: Marketable securities | 605) | 417) | 207) | 422) | 519) | 16,456) | |
| Operating assets | 229,865) | 157,158) | 130,315) | 124,197) | 87,395) | 84,553) | |
| Operating Liabilities | |||||||
| Total liabilities | 218,703) | 147,392) | 131,737) | 132,828) | 115,065) | 125,155) | |
| Less: Notes payable and other borrowings, current | 7,199) | 7,271) | 10,605) | 4,061) | 3,749) | 8,250) | |
| Less: Finance lease liabilities, current | 620) | 257) | —) | —) | —) | —) | |
| Less: Notes payable and other borrowings, non-current | 122,342) | 85,297) | 76,264) | 86,420) | 72,110) | 75,995) | |
| Less: Finance lease liabilities, non-current | 7,081) | 2,677) | —) | —) | —) | —) | |
| Operating liabilities | 81,461) | 51,890) | 44,868) | 42,347) | 39,206) | 40,910) | |
| Net operating assets1 | 148,404) | 105,268) | 85,447) | 81,850) | 48,189) | 43,643) | |
| Balance-sheet-based aggregate accruals2 | 43,136) | 19,821) | 3,597) | 33,661) | 4,546) | —) | |
| Financial Ratio | |||||||
| Balance-sheet-based accruals ratio3 | 34.01% | 20.79% | 4.30% | 51.77% | 9.90% | — | |
| Benchmarks | |||||||
| Balance-Sheet-Based Accruals Ratio, Competitors4 | |||||||
| Accenture PLC | — | 2.83% | 35.69% | 16.32% | 21.70% | 27.93% | |
| Adobe Inc. | — | -5.28% | -3.83% | 1.85% | -8.24% | 14.14% | |
| AppLovin Corp. | — | -20.02% | -0.63% | -1.52% | 36.28% | — | |
| Cadence Design Systems Inc. | — | 9.47% | 39.84% | 11.17% | 26.65% | — | |
| CrowdStrike Holdings Inc. | — | — | — | — | — | — | |
| Datadog Inc. | — | 53.88% | -28.51% | -35.73% | 17.56% | — | |
| International Business Machines Corp. | — | 16.28% | 2.79% | 2.42% | 1.55% | — | |
| Intuit Inc. | — | 3.52% | 3.35% | -1.74% | 85.68% | 139.73% | |
| Microsoft Corp. | — | 21.81% | 52.18% | 22.96% | 42.27% | 40.52% | |
| Palantir Technologies Inc. | — | 509.21% | — | — | — | — | |
| Palo Alto Networks Inc. | — | 32.24% | 89.91% | 137.01% | -124.73% | 85.21% | |
| Salesforce Inc. | 13.74% | 0.71% | -2.46% | -2.30% | 57.74% | — | |
| ServiceNow Inc. | — | 41.98% | 22.91% | 61.79% | 12.89% | — | |
| Synopsys Inc. | — | 154.48% | 7.85% | 13.85% | 5.01% | 0.36% | |
| Workday Inc. | 28.83% | 20.74% | 28.44% | -11.24% | 55.93% | — | |
| Balance-Sheet-Based Accruals Ratio, Sector | |||||||
| Software & Services | 0.00% | 21.94% | 26.16% | 18.26% | 29.59% | — | |
| Balance-Sheet-Based Accruals Ratio, Industry | |||||||
| Information Technology | 0.00% | 14.50% | 21.34% | 9.00% | 18.16% | — | |
Based on: 10-K (reporting date: 2026-05-31), 10-K (reporting date: 2025-05-31), 10-K (reporting date: 2024-05-31), 10-K (reporting date: 2023-05-31), 10-K (reporting date: 2022-05-31), 10-K (reporting date: 2021-05-31).
1 2026 Calculation
Net operating assets = Operating assets – Operating liabilities
= 229,865 – 81,461 = 148,404
2 2026 Calculation
Balance-sheet-based aggregate accruals = Net operating assets2026 – Net operating assets2025
= 148,404 – 105,268 = 43,136
3 2026 Calculation
Balance-sheet-based accruals ratio = 100 × Balance-sheet-based aggregate accruals ÷ Avg. net operating assets
= 100 × 43,136 ÷ [(148,404 + 105,268) ÷ 2] = 34.01%
4 Click competitor name to see calculations.
An analysis of the balance-sheet-based accruals reveals significant volatility in financial reporting quality metrics over the five-year period ending May 31, 2026. While the underlying asset base expanded consistently, the relationship between accruals and net operating assets shifted dramatically, suggesting periods of high divergence between reported accounting figures and cash-based reality.
- Net Operating Assets Expansion
- A consistent upward trajectory is observed in net operating assets, which grew from 48,189 million USD in May 2022 to 148,404 million USD by May 2026. This steady growth indicates a substantial expansion of the operational resource base over the analyzed period.
- Aggregate Accruals Volatility
- Balance-sheet-based aggregate accruals exhibited extreme fluctuations. A significant spike occurred in May 2023, reaching 33,661 million USD, followed by a sharp contraction to 3,597 million USD in May 2024. Following this low point, accruals trended upward again, ending at 43,136 million USD in May 2026.
- Accruals Ratio Analysis
- The balance-sheet-based accruals ratio mirrors the volatility of the absolute accrual values. The ratio peaked at 51.77% in May 2023, suggesting a high proportion of non-cash earnings relative to the asset base during that period. This was followed by a precipitous decline to a period low of 4.30% in May 2024. The subsequent rise to 20.79% in 2025 and 34.01% in 2026 indicates a recurring pattern of increasing accruals relative to operating assets.
- Financial Reporting Quality Implications
- The lack of stability in the accruals ratio suggests inconsistent earnings quality. The sharp transition from a high accruals environment in 2023 to a very low one in 2024, followed by a renewed upward trend, indicates that reported operating results have been heavily influenced by non-cash adjustments that do not scale linearly with the growth of net operating assets.
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Cash-Flow-Statement-Based Accruals Ratio
Oracle Corp., cash flow statement computation of aggregate accruals
US$ in millions
| May 31, 2026 | May 31, 2025 | May 31, 2024 | May 31, 2023 | May 31, 2022 | May 31, 2021 | ||
|---|---|---|---|---|---|---|---|
| Net income | 17,087) | 12,443) | 10,467) | 8,503) | 6,717) | 13,746) | |
| Less: Net cash provided by operating activities | 31,977) | 20,821) | 18,673) | 17,165) | 9,539) | 15,887) | |
| Less: Net cash (used for) provided by investing activities | (51,854) | (21,711) | (7,360) | (36,484) | 11,220) | (13,098) | |
| Cash-flow-statement-based aggregate accruals | 36,964) | 13,333) | (846) | 27,822) | (14,042) | 10,957) | |
| Financial Ratio | |||||||
| Cash-flow-statement-based accruals ratio1 | 29.14% | 13.98% | -1.01% | 42.79% | -30.58% | — | |
| Benchmarks | |||||||
| Cash-Flow-Statement-Based Accruals Ratio, Competitors2 | |||||||
| Accenture PLC | — | -6.95% | 24.31% | -0.19% | 11.87% | 11.80% | |
| Adobe Inc. | — | -14.85% | -21.90% | -21.73% | -19.93% | 9.21% | |
| AppLovin Corp. | — | -27.29% | -10.24% | -15.40% | 22.07% | — | |
| Cadence Design Systems Inc. | — | -3.48% | 17.36% | 3.78% | 15.03% | — | |
| CrowdStrike Holdings Inc. | — | — | — | — | — | — | |
| Datadog Inc. | — | 206.67% | 30.92% | 53.36% | -34.44% | — | |
| International Business Machines Corp. | — | 10.47% | -3.73% | 0.99% | -7.22% | — | |
| Intuit Inc. | — | -0.10% | -8.44% | -8.74% | 25.60% | 58.72% | |
| Microsoft Corp. | — | 12.55% | 30.89% | 5.22% | 13.42% | 17.68% | |
| Palantir Technologies Inc. | — | 2,593.23% | — | — | — | — | |
| Palo Alto Networks Inc. | — | -8.91% | 33.84% | -37.95% | -196.64% | -68.30% | |
| Salesforce Inc. | 1.74% | -6.66% | -8.44% | -8.49% | 21.96% | — | |
| ServiceNow Inc. | — | -29.72% | -7.12% | 15.44% | 8.80% | — | |
| Synopsys Inc. | — | 71.60% | -7.64% | 0.20% | -4.64% | -4.88% | |
| Workday Inc. | -55.17% | -4.25% | 34.56% | 18.64% | -0.65% | — | |
| Cash-Flow-Statement-Based Accruals Ratio, Sector | |||||||
| Software & Services | 0.00% | 10.41% | 11.97% | 7.19% | 2.21% | — | |
| Cash-Flow-Statement-Based Accruals Ratio, Industry | |||||||
| Information Technology | 0.00% | 6.07% | 6.20% | 1.46% | 2.99% | — | |
Based on: 10-K (reporting date: 2026-05-31), 10-K (reporting date: 2025-05-31), 10-K (reporting date: 2024-05-31), 10-K (reporting date: 2023-05-31), 10-K (reporting date: 2022-05-31), 10-K (reporting date: 2021-05-31).
1 2026 Calculation
Cash-flow-statement-based accruals ratio = 100 × Cash-flow-statement-based aggregate accruals ÷ Avg. net operating assets
= 100 × 36,964 ÷ [(148,404 + 105,268) ÷ 2] = 29.14%
2 Click competitor name to see calculations.
The financial data indicates a period of substantial expansion in the operating asset base accompanied by significant volatility in accrual-based reporting. Net operating assets demonstrate a consistent upward trajectory, growing from 48,189 million USD in 2022 to a projected 148,404 million USD by 2026, representing a nearly threefold increase over the five-year period.
The relationship between reported earnings and cash flows, as measured by the cash-flow-statement-based accruals ratio, exhibits high variance. The ratio shifts from a deeply negative position in 2022 to a significant peak in 2023, followed by a near-neutral position in 2024 and a subsequent climb through 2026. This pattern suggests fluctuating reporting quality or significant shifts in the timing of cash realizations relative to revenue recognition.
- Net Operating Assets Growth
- A sustained expansion is observed, with the most notable jump occurring between May 31, 2022, and May 31, 2023, where assets increased by approximately 70%. This growth continues through the projection period, with a final increase to 148,404 million USD by 2026.
- Aggregate Accruals Volatility
- Cash-flow-statement-based aggregate accruals show an erratic pattern. The transition from -14,042 million USD in 2022 to 27,822 million USD in 2023 indicates a sharp pivot from cash flows exceeding accrual earnings to a state where accrual earnings significantly exceed cash flows. A return to a near-zero balance of -846 million USD in 2024 suggests a temporary alignment of cash flows and earnings before a forecasted rise to 36,964 million USD by 2026.
- Accruals Ratio Interpretation
- The ratio fluctuates from -30.58% in 2022 to 42.79% in 2023, indicating a volatileEarnings quality profile. The low or negative ratios observed in 2022 and 2024 suggest higher reporting quality where cash flows support or exceed reported income. Conversely, the projected increase to 29.14% by 2026 indicates an increasing divergence between accounting profits and actual cash generation.
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