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
Salesforce Inc., balance sheet computation of aggregate accruals
US$ in millions
| Jan 31, 2026 | Jan 31, 2025 | Jan 31, 2024 | Jan 31, 2023 | Jan 31, 2022 | Jan 31, 2021 | ||
|---|---|---|---|---|---|---|---|
| Operating Assets | |||||||
| Total assets | 112,305) | 102,928) | 99,823) | 98,849) | 95,209) | 66,301) | |
| Less: Cash and cash equivalents | 7,327) | 8,848) | 8,472) | 7,016) | 5,464) | 6,195) | |
| Less: Marketable securities | 2,238) | 5,184) | 5,722) | 5,492) | 5,073) | 5,771) | |
| Operating assets | 102,740) | 88,896) | 85,629) | 86,341) | 84,672) | 54,335) | |
| Operating Liabilities | |||||||
| Total liabilities | 53,163) | 41,755) | 40,177) | 40,490) | 37,078) | 24,808) | |
| Less: Finance lease liabilities, current | 275) | 337) | 372) | 257) | 114) | 35) | |
| Less: Debt, current | 4,000) | —) | 999) | 1,182) | 4) | 4) | |
| Less: Noncurrent debt, excluding current portion | 10,439) | 8,433) | 8,427) | 9,419) | 10,592) | 2,673) | |
| Less: Noncurrent finance lease liabilities | 260) | 341) | 602) | 534) | 271) | 93) | |
| Operating liabilities | 38,189) | 32,644) | 29,777) | 29,098) | 26,097) | 22,003) | |
| Net operating assets1 | 64,551) | 56,252) | 55,852) | 57,243) | 58,575) | 32,332) | |
| Balance-sheet-based aggregate accruals2 | 8,299) | 400) | (1,391) | (1,332) | 26,243) | —) | |
| Financial Ratio | |||||||
| Balance-sheet-based accruals ratio3 | 13.74% | 0.71% | -2.46% | -2.30% | 57.74% | — | |
| 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% | |
| Oracle Corp. | — | 20.79% | 4.30% | 51.77% | 9.90% | 5.62% | |
| Palantir Technologies Inc. | — | 509.21% | — | — | — | — | |
| Palo Alto Networks Inc. | — | 32.24% | 89.91% | 137.01% | -124.73% | 85.21% | |
| 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% | 14.51% | 21.35% | 8.92% | 18.19% | — | |
Based on: 10-K (reporting date: 2026-01-31), 10-K (reporting date: 2025-01-31), 10-K (reporting date: 2024-01-31), 10-K (reporting date: 2023-01-31), 10-K (reporting date: 2022-01-31), 10-K (reporting date: 2021-01-31).
1 2026 Calculation
Net operating assets = Operating assets – Operating liabilities
= 102,740 – 38,189 = 64,551
2 2026 Calculation
Balance-sheet-based aggregate accruals = Net operating assets2026 – Net operating assets2025
= 64,551 – 56,252 = 8,299
3 2026 Calculation
Balance-sheet-based accruals ratio = 100 × Balance-sheet-based aggregate accruals ÷ Avg. net operating assets
= 100 × 8,299 ÷ [(64,551 + 56,252) ÷ 2] = 13.74%
4 Click competitor name to see calculations.
The information presents a fluctuating pattern in net operating assets over the five-year period. While net operating assets experienced a slight decrease from 2022 to 2023, followed by a more pronounced decline through 2024, a modest increase was observed in 2025, culminating in a substantial rise by 2026. However, the most significant trends are evident in the balance-sheet-based aggregate accruals and the corresponding accruals ratio.
- Balance-Sheet-Based Aggregate Accruals
- Aggregate accruals demonstrate a dramatic shift from a substantial positive value in 2022 to a negative value in 2023. This negative trend continued into 2024, before reversing to a small positive value in 2025. By 2026, aggregate accruals had increased considerably, returning to a positive and substantial level. This suggests a significant change in the timing of cash flows relative to reported earnings.
- Balance-Sheet-Based Accruals Ratio
- The accruals ratio mirrors the trend in aggregate accruals. A high accruals ratio of 57.74% in 2022 decreased sharply to -2.30% in 2023 and further to -2.46% in 2024. A modest recovery to 0.71% occurred in 2025, followed by a substantial increase to 13.74% in 2026. The initial decline indicates a reduction in the reliance on accruals to inflate reported earnings, while the subsequent increase suggests a renewed dependence on accruals. The negative values in 2023 and 2024 imply that cash flows from operations exceeded net income, potentially indicating high-quality earnings during those periods. However, the substantial increase in 2026 warrants further investigation to determine the underlying drivers and potential implications for earnings quality.
The volatility in the accruals ratio suggests potential fluctuations in the company’s accounting practices or underlying economic conditions. The shift from positive to negative accruals, and then back to positive accruals, requires further scrutiny to assess the sustainability of earnings and the potential for earnings manipulation. The significant increase in both aggregate accruals and the accruals ratio in the final year is a key area for additional analysis.
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Cash-Flow-Statement-Based Accruals Ratio
Salesforce Inc., cash flow statement computation of aggregate accruals
US$ in millions
| Jan 31, 2026 | Jan 31, 2025 | Jan 31, 2024 | Jan 31, 2023 | Jan 31, 2022 | Jan 31, 2021 | ||
|---|---|---|---|---|---|---|---|
| Net income | 7,457) | 6,197) | 4,136) | 208) | 1,444) | 4,072) | |
| Less: Net cash provided by operating activities | 14,996) | 13,092) | 10,234) | 7,111) | 6,000) | 4,801) | |
| Less: Net cash used in investing activities | (8,590) | (3,163) | (1,327) | (1,989) | (14,536) | (3,971) | |
| Cash-flow-statement-based aggregate accruals | 1,051) | (3,732) | (4,771) | (4,914) | 9,980) | 3,242) | |
| Financial Ratio | |||||||
| Cash-flow-statement-based accruals ratio1 | 1.74% | -6.66% | -8.44% | -8.49% | 21.96% | — | |
| 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% | |
| Oracle Corp. | — | 13.98% | -1.01% | 42.79% | -30.58% | 25.81% | |
| Palantir Technologies Inc. | — | 2,593.23% | — | — | — | — | |
| Palo Alto Networks Inc. | — | -8.91% | 33.84% | -37.95% | -196.64% | -68.30% | |
| 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% | 6.09% | 6.25% | 1.40% | 2.99% | — | |
Based on: 10-K (reporting date: 2026-01-31), 10-K (reporting date: 2025-01-31), 10-K (reporting date: 2024-01-31), 10-K (reporting date: 2023-01-31), 10-K (reporting date: 2022-01-31), 10-K (reporting date: 2021-01-31).
1 2026 Calculation
Cash-flow-statement-based accruals ratio = 100 × Cash-flow-statement-based aggregate accruals ÷ Avg. net operating assets
= 100 × 1,051 ÷ [(64,551 + 56,252) ÷ 2] = 1.74%
2 Click competitor name to see calculations.
The information presents a five-year trend of net operating assets, cash-flow-statement-based aggregate accruals, and the resulting accruals ratio. Net operating assets experienced a slight decrease from 2022 to 2024, followed by increases in 2025 and 2026. However, the most significant movement is observed in the cash-flow-statement-based aggregate accruals and the accruals ratio.
- Cash-Flow-Statement-Based Aggregate Accruals
- Aggregate accruals demonstrate a substantial shift from positive values in 2022 to negative values from 2023 through 2025. In 2022, aggregate accruals were US$9,980 million. This figure reversed to negative US$4,914 million in 2023, and remained negative for the subsequent two years, reaching negative US$3,732 million in 2025. A notable change occurs in 2026, with accruals turning positive at US$1,051 million.
- Cash-Flow-Statement-Based Accruals Ratio
- The accruals ratio mirrors the trend in aggregate accruals. It begins at 21.96% in 2022, then declines sharply to -8.49% in 2023 and remains negative, reaching -6.66% in 2025. The ratio becomes positive in 2026, registering at 1.74%. The consistent negative accruals ratio from 2023 to 2025 suggests that cash flows are not fully supported by reported earnings during those periods.
The shift from positive to negative accruals, and consequently the accruals ratio, warrants further investigation. The return to positive accruals in 2026, alongside increasing net operating assets, may indicate a stabilization or improvement in the relationship between earnings and cash flow. However, the prior three-year period of negative accruals should be examined to understand the underlying drivers and potential implications for financial reporting quality.
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