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
UnitedHealth Group Inc., 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 | 309,581) | 298,278) | 273,720) | 245,705) | 212,206) | |
| Less: Cash and cash equivalents | 24,365) | 25,312) | 25,427) | 23,365) | 21,375) | |
| Less: Short-term investments | 3,756) | 3,801) | 4,201) | 4,546) | 2,532) | |
| Less: Assets under management | —) | —) | 3,755) | 4,087) | 4,449) | |
| Operating assets | 281,460) | 269,165) | 240,337) | 213,707) | 183,850) | |
| Operating Liabilities | ||||||
| Total liabilities | 207,883) | 195,687) | 174,801) | 159,358) | 135,727) | |
| Less: Short-term borrowings and current maturities of long-term debt | 6,069) | 4,545) | 4,274) | 3,110) | 3,620) | |
| Less: Long-term debt, less current maturities | 72,320) | 72,359) | 58,263) | 54,513) | 42,383) | |
| Operating liabilities | 129,494) | 118,783) | 112,264) | 101,735) | 89,724) | |
| Net operating assets1 | 151,966) | 150,382) | 128,073) | 111,972) | 94,126) | |
| Balance-sheet-based aggregate accruals2 | 1,584) | 22,309) | 16,101) | 17,846) | —) | |
| Financial Ratio | ||||||
| Balance-sheet-based accruals ratio3 | 1.05% | 16.02% | 13.41% | 17.32% | — | |
| Benchmarks | ||||||
| Balance-Sheet-Based Accruals Ratio, Competitors4 | ||||||
| Abbott Laboratories | 4.88% | 15.62% | 6.06% | -0.73% | — | |
| Elevance Health Inc. | 5.08% | 29.70% | 7.14% | 0.32% | — | |
| Intuitive Surgical Inc. | -4.16% | 41.97% | 15.55% | -10.21% | — | |
| Medtronic PLC | 0.54% | -0.93% | 2.69% | -1.37% | 3.72% | |
| Balance-Sheet-Based Accruals Ratio, Sector | ||||||
| Health Care Equipment & Services | 1.88% | 14.53% | 8.90% | 6.46% | — | |
| Balance-Sheet-Based Accruals Ratio, Industry | ||||||
| Health Care | 7.67% | 5.49% | 7.79% | 5.30% | — | |
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
= 281,460 – 129,494 = 151,966
2 2025 Calculation
Balance-sheet-based aggregate accruals = Net operating assets2025 – Net operating assets2024
= 151,966 – 150,382 = 1,584
3 2025 Calculation
Balance-sheet-based accruals ratio = 100 × Balance-sheet-based aggregate accruals ÷ Avg. net operating assets
= 100 × 1,584 ÷ [(151,966 + 150,382) ÷ 2] = 1.05%
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. A notable fluctuation in balance-sheet-based accruals is observed, impacting the accruals ratio significantly.
- Net Operating Assets
- Net operating assets demonstrate a consistent upward trend throughout the period, increasing from 111,972 US$ millions in 2022 to 151,966 US$ millions in 2025. The rate of increase slows between 2024 and 2025, with a smaller gain compared to prior years.
- Balance-Sheet-Based Aggregate Accruals
- Aggregate accruals initially decreased from 17,846 US$ millions in 2022 to 16,101 US$ millions in 2023. A subsequent increase is then observed, reaching 22,309 US$ millions in 2024. However, a substantial decline occurs in 2025, with accruals falling to 1,584 US$ millions. This represents a dramatic reduction from the prior year.
- Balance-Sheet-Based Accruals Ratio
- The accruals ratio mirrors the trend in aggregate accruals. It decreased from 17.32% in 2022 to 13.41% in 2023. An increase to 16.02% occurred in 2024, followed by a significant drop to 1.05% in 2025. This final value indicates a considerably lower level of accruals relative to net operating assets. The volatility in this ratio warrants further investigation to understand the underlying drivers of these changes.
The substantial decrease in both aggregate accruals and the accruals ratio in 2025 is a key observation. This could be due to a variety of factors, including changes in accounting practices, improved cash flow management, or a deliberate reduction in the use of accrual accounting. Further analysis is recommended to determine the cause and assess any potential implications for the quality of reported earnings.
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Cash-Flow-Statement-Based Accruals Ratio
UnitedHealth Group Inc., 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 earnings attributable to UnitedHealth Group common shareholders | 12,056) | 14,405) | 22,381) | 20,120) | 17,285) | |
| Less: Cash flows from operating activities | 19,697) | 24,204) | 29,068) | 26,206) | 22,343) | |
| Less: Cash flows used for investing activities | (8,685) | (20,527) | (15,574) | (28,476) | (10,372) | |
| Cash-flow-statement-based aggregate accruals | 1,044) | 10,728) | 8,887) | 22,390) | 5,314) | |
| Financial Ratio | ||||||
| Cash-flow-statement-based accruals ratio1 | 0.69% | 7.71% | 7.40% | 21.73% | — | |
| Benchmarks | ||||||
| Cash-Flow-Statement-Based Accruals Ratio, Competitors2 | ||||||
| Abbott Laboratories | -1.12% | 14.32% | 3.55% | -2.08% | — | |
| Elevance Health Inc. | 6.97% | 16.15% | 12.87% | 8.35% | — | |
| Intuitive Surgical Inc. | -6.85% | 30.74% | 4.54% | -20.88% | — | |
| Medtronic PLC | -0.66% | -1.10% | 1.80% | -0.97% | 0.35% | |
| Cash-Flow-Statement-Based Accruals Ratio, Sector | ||||||
| Health Care Equipment & Services | 0.57% | 8.55% | 5.82% | 8.70% | — | |
| Cash-Flow-Statement-Based Accruals Ratio, Industry | ||||||
| Health Care | 4.65% | 4.00% | 8.59% | 4.25% | — | |
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 × 1,044 ÷ [(151,966 + 150,382) ÷ 2] = 0.69%
2 Click competitor name to see calculations.
Net operating assets exhibited consistent growth over the four-year period, increasing from US$111,972 million in 2022 to US$151,966 million in 2025. However, cash-flow-statement-based aggregate accruals and the corresponding accruals ratio demonstrate a significant declining trend.
- Cash-Flow-Statement-Based Aggregate Accruals
- Cash-flow-statement-based aggregate accruals decreased substantially from US$22,390 million in 2022 to US$1,044 million in 2025. This represents a considerable reduction in the cumulative amount of non-cash adjustments impacting net income. The largest decrease occurred between 2022 and 2023, followed by more moderate declines in subsequent years.
- Cash-Flow-Statement-Based Accruals Ratio
- The cash-flow-statement-based accruals ratio mirrored the trend in aggregate accruals, declining markedly from 21.73% in 2022 to 0.69% in 2025. This indicates a diminishing proportion of net operating assets financed by accruals. The ratio experienced the most significant drop between 2022 and 2023, falling to 7.40%, and continued to decrease, albeit at a slower pace, reaching 0.69% in 2025. The stabilization around 7-8% in 2023 and 2024 before the final drop suggests a potential shift in the company’s operational or accounting practices.
The observed decrease in both aggregate accruals and the accruals ratio could suggest improved earnings quality, as a lower reliance on accruals generally indicates a greater proportion of earnings derived from actual cash flows. However, further investigation is warranted to determine the underlying reasons for these changes and to assess any potential implications for future financial performance. A sustained low accruals ratio may also indicate conservative accounting practices.
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