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.
Paying user area
Try for free
Schlumberger Ltd. pages available for free this week:
- Common-Size Income Statement
- Enterprise Value to EBITDA (EV/EBITDA)
- Capital Asset Pricing Model (CAPM)
- Present Value of Free Cash Flow to Equity (FCFE)
- Return on Equity (ROE) since 2005
- Return on Assets (ROA) since 2005
- Current Ratio since 2005
- Debt to Equity since 2005
- Price to Earnings (P/E) since 2005
- Price to Sales (P/S) since 2005
The data is hidden behind: . Unhide it.
Get full access to the entire website from $10.42/mo, or
get 1-month access to Schlumberger Ltd. for $24.99.
This is a one-time payment. There is no automatic renewal.
We accept:
Balance-Sheet-Based Accruals Ratio
Schlumberger Ltd., balance sheet computation of aggregate accruals
US$ in millions
Based on: 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), 10-K (reporting date: 2020-12-31).
1 2024 Calculation
Net operating assets = Operating assets – Operating liabilities
= – =
2 2024 Calculation
Balance-sheet-based aggregate accruals = Net operating assets2024 – Net operating assets2023
= – =
3 2024 Calculation
Balance-sheet-based accruals ratio = 100 × Balance-sheet-based aggregate accruals ÷ Avg. net operating assets
= 100 × ÷ [( + ) ÷ 2] =
The analysis of the annual financial reporting quality measure data reveals several notable trends over the four-year period ending in 2024.
- Net Operating Assets
- There is a consistent upward trend in net operating assets, increasing from US$26,342 million in 2021 to US$29,755 million in 2024. This gradual increase suggests expansion in operating asset base, with the largest increment observed between 2022 and 2023.
- Balance-sheet-based Aggregate Accruals
- The balance-sheet-based aggregate accruals exhibit considerable fluctuations. In 2021, the value was slightly negative at -27 million, which then surged sharply to 979 million in 2022. This positive momentum continued with a significant increase to 2,014 million in 2023, followed by a sharp decline to 420 million in 2024. This pattern indicates volatility in accrual adjustments relative to operating activities across the years.
- Balance-sheet-based Accruals Ratio
- The accruals ratio, expressed as a percentage, mirrors the volatility seen in aggregate accruals. It begins slightly negative at -0.1% in 2021, then jumps to 3.65% in 2022. The ratio peaks at 7.11% in 2023 before declining substantially to 1.42% in 2024. This suggests that the relative size of accruals to net operating assets increased notably through 2023 and then decreased notably in the final reported period.
Overall, the data indicate growing net operating assets accompanied by fluctuating accrual-based measures. The marked increase in accruals and their ratio in 2022 and 2023 could imply changes in accounting estimates, recognition of revenues or expenses, or shifts in earnings quality during these years. The reduction in 2024 may signal a normalization or adjustment in accounting practices or operational performance.
Cash-Flow-Statement-Based Accruals Ratio
Schlumberger Ltd., cash flow statement computation of aggregate accruals
US$ in millions
Based on: 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), 10-K (reporting date: 2020-12-31).
1 2024 Calculation
Cash-flow-statement-based accruals ratio = 100 × Cash-flow-statement-based aggregate accruals ÷ Avg. net operating assets
= 100 × ÷ [( + ) ÷ 2] =
The analysis of the financial reporting quality measures over the period from December 31, 2021, to December 31, 2024, reveals notable trends in net operating assets and cash-flow-statement-based accruals for Schlumberger Ltd.
- Net Operating Assets
- There is a consistent upward trend in net operating assets throughout the four-year period. The value increased from 26,342 million US dollars at the end of 2021 to 29,755 million US dollars by the end of 2024. This steady increase suggests ongoing investments or asset growth in the company’s core operations.
- Cash-Flow-Statement-Based Aggregate Accruals
- The aggregate accruals demonstrate significant variability over the years. Initially, in 2021, the figure was negative at -1,851 million US dollars, indicating possible cash inflows exceeding earnings adjustments. However, in 2022, this shifted sharply to a positive 1,109 million US dollars, followed by a decrease to 349 million in 2023 and a subsequent rise to 1,004 million in 2024. Such fluctuation may reflect changing working capital components or variations in non-cash expenses relative to cash flow during this timeframe.
- Cash-Flow-Statement-Based Accruals Ratio
- The accruals ratio, expressed as a percentage, mirrors the aggregate accruals' variability but with more moderate values. It started at -7.02% in 2021, indicating a negative accrual effect relative to net operating assets. The ratio then shifted to positive territory at 4.13% in 2022, declined notably to 1.23% in 2023, and moderately increased again to 3.40% in 2024. This pattern suggests fluctuations in the proportion of accruals within operating assets which could impact earnings quality, potentially signaling alternating periods of earnings management or changes in operational cash flow timing.