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.
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Balance-Sheet-Based Accruals Ratio
Walt Disney Co., balance sheet computation of aggregate accruals
US$ in millions
| Sep 27, 2025 | Sep 28, 2024 | Sep 30, 2023 | Oct 1, 2022 | Oct 2, 2021 | Oct 3, 2020 | ||
|---|---|---|---|---|---|---|---|
| Operating Assets | |||||||
| Total assets | |||||||
| Less: Cash and cash equivalents | |||||||
| Operating assets | |||||||
| Operating Liabilities | |||||||
| Total liabilities | |||||||
| Less: Short-term finance lease liabilities | |||||||
| Less: Current portion of borrowings | |||||||
| Less: Borrowings, excluding current portion | |||||||
| Less: Long-term finance lease liabilities | |||||||
| Operating liabilities | |||||||
| Net operating assets1 | |||||||
| Balance-sheet-based aggregate accruals2 | |||||||
| Financial Ratio | |||||||
| Balance-sheet-based accruals ratio3 | |||||||
| Benchmarks | |||||||
| Balance-Sheet-Based Accruals Ratio, Competitors4 | |||||||
| Alphabet Inc. | |||||||
| Comcast Corp. | |||||||
| Meta Platforms Inc. | |||||||
| Netflix Inc. | |||||||
| Trade Desk Inc. | |||||||
| Balance-Sheet-Based Accruals Ratio, Sector | |||||||
| Media & Entertainment | |||||||
| Balance-Sheet-Based Accruals Ratio, Industry | |||||||
| Communication Services | |||||||
Based on: 10-K (reporting date: 2025-09-27), 10-K (reporting date: 2024-09-28), 10-K (reporting date: 2023-09-30), 10-K (reporting date: 2022-10-01), 10-K (reporting date: 2021-10-02), 10-K (reporting date: 2020-10-03).
1 2025 Calculation
Net operating assets = Operating assets – Operating liabilities
= – =
2 2025 Calculation
Balance-sheet-based aggregate accruals = Net operating assets2025 – Net operating assets2024
= – =
3 2025 Calculation
Balance-sheet-based accruals ratio = 100 × Balance-sheet-based aggregate accruals ÷ Avg. net operating assets
= 100 × ÷ [( + ) ÷ 2] =
4 Click competitor name to see calculations.
The analysis of the annual financial reporting quality measure data reveals notable fluctuations and trends over the examined periods. The net operating assets demonstrate a generally increasing trend, rising steadily from 140,958 million USD in 2021 to 151,105 million USD in 2025. This indicates a consistent growth in the company's operating asset base over the five-year span.
The balance-sheet-based aggregate accruals, however, show considerable volatility. After an initial increase from 2,424 million USD in 2021 to 4,430 million USD in 2022, there is a sharp decline to 116 million USD by 2023, further tapering to 21 million USD in 2024. This trend is abruptly reversed in 2025, with a significant surge to 5,580 million USD. Such variability suggests fluctuations in accrual accounting practices or adjustments related to non-cash earnings components within those years.
The balance-sheet-based accruals ratio mirrors the pattern observed in aggregate accruals. It starts at 1.73% in 2021, rises to 3.09% in 2022, then plunges to nearly negligible levels of 0.08% and 0.01% in 2023 and 2024 respectively, before escalating sharply to 3.76% in 2025. This ratio's oscillations may indicate inconsistent accrual-based earnings quality, with periods of both low and high reliance on accruals relative to net operating assets.
Overall, while net operating assets show a steady increase, the balance-sheet-based accruals and the associated accruals ratio betray marked instability. The notable spike in accruals and accruals ratio in the final year warrants further investigation to understand the underlying causes and their implications on the earnings quality.
- Net Operating Assets
- Exhibited a steady upward trajectory from 140,958 million USD in 2021 to 151,105 million USD in 2025, reflecting growth in operating asset holdings.
- Balance-sheet-based Aggregate Accruals
- Displayed significant volatility, with an increase in 2022 followed by sharp decreases in 2023 and 2024, then a substantial increase in 2025.
- Balance-sheet-based Accruals Ratio
- Followed a similar volatile pattern to aggregate accruals, ranging from a low of 0.01% in 2024 to a high of 3.76% in 2025, indicating fluctuating accruals' impact on earnings quality.
Cash-Flow-Statement-Based Accruals Ratio
Walt Disney Co., cash flow statement computation of aggregate accruals
US$ in millions
| Sep 27, 2025 | Sep 28, 2024 | Sep 30, 2023 | Oct 1, 2022 | Oct 2, 2021 | Oct 3, 2020 | ||
|---|---|---|---|---|---|---|---|
| Net income (loss) attributable to The Walt Disney Company (Disney) | |||||||
| Less: Cash provided by operations | |||||||
| Less: Cash used in investing activities | |||||||
| Cash-flow-statement-based aggregate accruals | |||||||
| Financial Ratio | |||||||
| Cash-flow-statement-based accruals ratio1 | |||||||
| Benchmarks | |||||||
| Cash-Flow-Statement-Based Accruals Ratio, Competitors2 | |||||||
| Alphabet Inc. | |||||||
| Comcast Corp. | |||||||
| Meta Platforms Inc. | |||||||
| Netflix Inc. | |||||||
| Trade Desk Inc. | |||||||
| Cash-Flow-Statement-Based Accruals Ratio, Sector | |||||||
| Media & Entertainment | |||||||
| Cash-Flow-Statement-Based Accruals Ratio, Industry | |||||||
| Communication Services | |||||||
Based on: 10-K (reporting date: 2025-09-27), 10-K (reporting date: 2024-09-28), 10-K (reporting date: 2023-09-30), 10-K (reporting date: 2022-10-01), 10-K (reporting date: 2021-10-02), 10-K (reporting date: 2020-10-03).
1 2025 Calculation
Cash-flow-statement-based accruals ratio = 100 × Cash-flow-statement-based aggregate accruals ÷ Avg. net operating assets
= 100 × ÷ [( + ) ÷ 2] =
2 Click competitor name to see calculations.
A review of the annual financial reporting quality measures reveals several notable trends over the five-year period under consideration.
- Net Operating Assets
- Net operating assets displayed a modest upward trend from US$140,958 million in October 2021 to US$151,105 million by September 2025. This represents an overall increase of approximately 7%, indicating a steady expansion in operating asset base over the period. The growth is gradual without significant volatility, suggesting stable asset management and possibly moderate reinvestment or acquisition strategies aligning with operational needs.
- Cash-Flow-Statement-Based Aggregate Accruals
- The aggregate accruals exhibited considerable fluctuations throughout the analyzed years. Starting with a negative value of -US$400 million in 2021, the figure rose sharply to a positive US$2,151 million in 2022, then plunged to -US$2,871 million in 2023 and -US$2,118 million in 2024, before ascending again to US$2,346 million in 2025. These swings indicate volatility in the accrual components of cash flow, which may reflect changes in earnings management practices, timing differences in revenue and expense recognition, or operational cash flow variability.
- Cash-Flow-Statement-Based Accruals Ratio
- Consistent with the aggregate accruals data, the accruals ratio fluctuated between positive and negative values. The ratio began at -0.29% in 2021, peaked at 1.5% in 2022, declined to -1.97% in 2023, moved upward to -1.46% in 2024, and finally reached 1.58% in 2025. The alternating sign of this ratio suggests changing alignment between net income and cash flows from operations, which may affect the perceived quality of earnings. A consistently positive or negative ratio could signal consistent earnings quality trends, but the oscillation observed here may warrant closer scrutiny to understand underlying causes.