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
Walmart 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 | 284,668) | 260,823) | 252,399) | 243,197) | 244,860) | 252,496) | |
| Less: Cash and cash equivalents | 10,727) | 9,037) | 9,867) | 8,625) | 14,760) | 17,741) | |
| Operating assets | 273,941) | 251,786) | 242,532) | 234,572) | 230,100) | 234,755) | |
| Operating Liabilities | |||||||
| Total liabilities | 178,488) | 163,131) | 161,828) | 159,206) | 152,969) | 164,965) | |
| Less: Short-term borrowings | 6,596) | 3,068) | 878) | 372) | 410) | 224) | |
| Less: Long-term debt due within one year | 3,542) | 2,598) | 3,447) | 4,191) | 2,803) | 3,115) | |
| Less: Finance lease obligations due within one year | 856) | 800) | 725) | 567) | 511) | 491) | |
| Less: Long-term debt, excluding due within one year | 34,624) | 33,401) | 36,132) | 34,649) | 34,864) | 41,194) | |
| Less: Long-term finance lease obligations, excluding due within one year | 5,905) | 5,923) | 5,709) | 4,843) | 4,243) | 3,847) | |
| Operating liabilities | 126,965) | 117,341) | 114,937) | 114,584) | 110,138) | 116,094) | |
| Net operating assets1 | 146,976) | 134,445) | 127,595) | 119,988) | 119,962) | 118,661) | |
| Balance-sheet-based aggregate accruals2 | 12,531) | 6,850) | 7,607) | 26) | 1,301) | —) | |
| Financial Ratio | |||||||
| Balance-sheet-based accruals ratio3 | 8.91% | 5.23% | 6.15% | 0.02% | 1.09% | — | |
| Benchmarks | |||||||
| Balance-Sheet-Based Accruals Ratio, Competitors4 | |||||||
| Costco Wholesale Corp. | — | 6.21% | 11.49% | -0.39% | 20.71% | 5.32% | |
| Target Corp. | 4.87% | 0.70% | 2.06% | 19.69% | 10.33% | — | |
| Balance-Sheet-Based Accruals Ratio, Sector | |||||||
| Consumer Staples Distribution & Retail | 0.00% | 4.68% | 6.12% | 2.78% | 4.30% | — | |
| Balance-Sheet-Based Accruals Ratio, Industry | |||||||
| Consumer Staples | 0.00% | 7.28% | 1.15% | 2.58% | 7.61% | — | |
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
= 273,941 – 126,965 = 146,976
2 2026 Calculation
Balance-sheet-based aggregate accruals = Net operating assets2026 – Net operating assets2025
= 146,976 – 134,445 = 12,531
3 2026 Calculation
Balance-sheet-based accruals ratio = 100 × Balance-sheet-based aggregate accruals ÷ Avg. net operating assets
= 100 × 12,531 ÷ [(146,976 + 134,445) ÷ 2] = 8.91%
4 Click competitor name to see calculations.
Net operating assets exhibited a consistent upward trend over the five-year period, increasing from US$119,962 million in 2022 to US$146,976 million in 2026. However, the balance-sheet-based aggregate accruals and the corresponding accruals ratio demonstrate significant fluctuations during the same timeframe.
- Balance-Sheet-Based Aggregate Accruals
- Aggregate accruals were relatively high at US$1,301 million in 2022, then decreased dramatically to US$26 million in 2023. A substantial increase is then observed in 2024, reaching US$7,607 million, followed by US$6,850 million in 2025, and culminating in US$12,531 million in 2026. This pattern suggests potential shifts in the timing of revenue and expense recognition, or changes in working capital management.
- Balance-Sheet-Based Accruals Ratio
- The accruals ratio mirrors the trend in aggregate accruals. It began at 1.09% in 2022, plummeted to 0.02% in 2023, and then rose sharply to 6.15% in 2024. The ratio decreased slightly to 5.23% in 2025 before increasing again to 8.91% in 2026. The significant volatility in this ratio warrants further investigation. A ratio consistently above zero indicates the presence of accruals, but the magnitude of the fluctuations suggests potential earnings management or changes in the underlying business operations. The substantial increase in the ratio from 2023 to 2024, and its continued rise through 2026, is particularly noteworthy.
The divergence between the steady growth in net operating assets and the fluctuating accruals figures suggests a complex relationship between asset growth and earnings quality. The increasing accruals ratio in recent years could indicate a growing reliance on accruals to generate reported earnings, which may require closer scrutiny to assess the sustainability of reported performance.
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Cash-Flow-Statement-Based Accruals Ratio
Walmart Inc., cash flow statement computation of aggregate accruals
US$ in millions
| Jan 31, 2026 | Jan 31, 2025 | Jan 31, 2024 | Jan 31, 2023 | Jan 31, 2022 | Jan 31, 2021 | ||
|---|---|---|---|---|---|---|---|
| Consolidated net income attributable to Walmart | 21,893) | 19,436) | 15,511) | 11,680) | 13,673) | 13,510) | |
| Less: Net cash provided by operating activities | 41,565) | 36,443) | 35,726) | 28,841) | 24,181) | 36,074) | |
| Less: Net cash used in investing activities | (26,350) | (21,379) | (21,287) | (17,722) | (6,015) | (10,071) | |
| Cash-flow-statement-based aggregate accruals | 6,678) | 4,372) | 1,072) | 561) | (4,493) | (12,493) | |
| Financial Ratio | |||||||
| Cash-flow-statement-based accruals ratio1 | 4.75% | 3.34% | 0.87% | 0.47% | -3.77% | — | |
| Benchmarks | |||||||
| Cash-Flow-Statement-Based Accruals Ratio, Competitors2 | |||||||
| Costco Wholesale Corp. | — | 0.37% | 2.33% | 1.10% | 14.69% | -2.96% | |
| Target Corp. | 2.99% | -1.62% | 1.09% | 18.64% | 7.52% | — | |
| Cash-Flow-Statement-Based Accruals Ratio, Sector | |||||||
| Consumer Staples Distribution & Retail | 0.00% | 2.27% | 1.06% | 3.13% | -0.42% | — | |
| Cash-Flow-Statement-Based Accruals Ratio, Industry | |||||||
| Consumer Staples | 0.00% | 3.80% | -0.17% | 2.27% | 4.81% | — | |
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 × 6,678 ÷ [(146,976 + 134,445) ÷ 2] = 4.75%
2 Click competitor name to see calculations.
Net operating assets exhibited a consistent upward trend over the five-year period, increasing from US$119,962 million in 2022 to US$146,976 million in 2026. This indicates overall growth in the company’s operational investments and assets. However, the cash-flow-statement-based aggregate accruals and the corresponding accruals ratio demonstrate a more volatile pattern.
- Cash-Flow-Statement-Based Aggregate Accruals
- In 2022, aggregate accruals were negative, registering at -US$4,493 million. This suggests a significant cash inflow exceeding reported earnings during that period. A substantial shift occurred in 2023, with accruals turning positive at US$561 million, indicating earnings exceeding cash flow. Subsequent years show a continued positive trend, with accruals increasing to US$1,072 million in 2024, US$4,372 million in 2025, and reaching US$6,678 million in 2026. This progression implies a growing reliance on accruals to support reported earnings.
- Cash-Flow-Statement-Based Accruals Ratio
- The accruals ratio mirrored the trend in aggregate accruals. It began at -3.77% in 2022, reflecting the negative accruals. In 2023, the ratio became positive at 0.47%, and then increased steadily to 0.87% in 2024 and 3.34% in 2025. By 2026, the accruals ratio reached 4.75%. This increasing ratio suggests a growing proportion of reported earnings are derived from non-cash accruals rather than actual cash flow from operations. While not inherently negative, a consistently increasing accruals ratio warrants further investigation to understand the underlying drivers and potential implications for earnings quality.
The divergence between the growth in net operating assets and the increasing accruals ratio suggests a potential shift in how the company finances its growth. The increasing reliance on accruals to bolster earnings, as indicated by the ratio, could be a signal requiring closer scrutiny of the company’s accounting practices and the sustainability of its reported profitability.
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