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
Walt Disney Co., balance sheet computation of aggregate accruals
US$ in millions
| Oct 3, 2020 | Sep 28, 2019 | Sep 29, 2018 | Sep 30, 2017 | Oct 1, 2016 | Oct 3, 2015 | ||
|---|---|---|---|---|---|---|---|
| Operating Assets | |||||||
| Total assets | 201,549 | 193,984 | 98,598 | 95,789 | 92,033 | 88,182 | |
| Less: Cash and cash equivalents | 17,914 | 5,418 | 4,150 | 4,017 | 4,610 | 4,269 | |
| Operating assets | 183,635 | 188,566 | 94,448 | 91,772 | 87,423 | 83,913 | |
| Operating Liabilities | |||||||
| Total liabilities | 104,037 | 91,132 | 44,643 | 49,637 | 44,710 | 39,527 | |
| Less: Current portion of borrowings | 5,711 | 8,857 | 3,790 | 6,172 | 3,687 | 4,563 | |
| Less: Borrowings, excluding current portion | 52,917 | 38,129 | 17,084 | 19,119 | 16,483 | 12,773 | |
| Operating liabilities | 45,409 | 44,146 | 23,769 | 24,346 | 24,540 | 22,191 | |
| Net operating assets1 | 138,226 | 144,420 | 70,679 | 67,426 | 62,883 | 61,722 | |
| Balance-sheet-based aggregate accruals2 | (6,194) | 73,741 | 3,253 | 4,543 | 1,161 | — | |
| Financial Ratio | |||||||
| Balance-sheet-based accruals ratio3 | -4.38% | 68.56% | 4.71% | 6.97% | 1.86% | — | |
| Benchmarks | |||||||
| Balance-Sheet-Based Accruals Ratio, Competitors4 | |||||||
| Activision Blizzard Inc. | 3.14% | -1.20% | 7.01% | -16.30% | — | — | |
| Alphabet Inc. | 15.42% | 17.54% | 28.17% | -3.66% | — | — | |
| Charter Communications Inc. | -2.09% | -1.85% | -0.51% | 5.76% | — | — | |
| Comcast Corp. | 1.68% | 0.12% | 31.76% | 13.40% | — | — | |
| Facebook Inc. | 35.79% | 7.14% | 27.43% | 9.27% | — | — | |
| Netflix Inc. | 10.12% | 37.89% | 47.69% | 50.97% | — | — | |
| Balance-Sheet-Based Accruals Ratio, Sector | |||||||
| Media & Entertainment | 5.07% | 17.05% | 18.56% | 7.37% | 200.00% | — | |
| Balance-Sheet-Based Accruals Ratio, Industry | |||||||
| Communication Services | 6.84% | 8.14% | 20.48% | 9.90% | 200.00% | — | |
Based on: 10-K (filing date: 2020-11-25), 10-K (filing date: 2019-11-20), 10-K (filing date: 2018-11-21), 10-K (filing date: 2017-11-22), 10-K (filing date: 2016-11-23), 10-K (filing date: 2015-11-25).
1 2020 Calculation
Net operating assets = Operating assets – Operating liabilities
= 183,635 – 45,409 = 138,226
2 2020 Calculation
Balance-sheet-based aggregate accruals = Net operating assets2020 – Net operating assets2019
= 138,226 – 144,420 = -6,194
3 2020 Calculation
Balance-sheet-based accruals ratio = 100 × Balance-sheet-based aggregate accruals ÷ Avg. net operating assets
= 100 × -6,194 ÷ [(138,226 + 144,420) ÷ 2] = -4.38%
4 Click competitor name to see calculations.
| Financial ratio | Description | The company |
|---|---|---|
| Balance-sheet-based accruals ratio | Ratio is found by dividing balance-sheet-based aggregate accruals by average net operating assets. | Using the balance-sheet-based accruals ratio, Walt Disney Co. improved earnings quality from 2019 to 2020. |
Cash-Flow-Statement-Based Accruals Ratio
Walt Disney Co., cash flow statement computation of aggregate accruals
US$ in millions
| Oct 3, 2020 | Sep 28, 2019 | Sep 29, 2018 | Sep 30, 2017 | Oct 1, 2016 | Oct 3, 2015 | ||
|---|---|---|---|---|---|---|---|
| Net income (loss) attributable to The Walt Disney Company (Disney) | (2,864) | 11,054 | 12,598 | 8,980 | 9,391 | 8,382 | |
| Less: Cash provided by operations | 7,616 | 5,984 | 14,295 | 12,343 | 13,213 | 10,909 | |
| Less: Cash used in investing activities | (3,850) | (15,096) | (5,336) | (4,111) | (5,758) | (4,245) | |
| Cash-flow-statement-based aggregate accruals | (6,630) | 20,166 | 3,639 | 748 | 1,936 | 1,718 | |
| Financial Ratio | |||||||
| Cash-flow-statement-based accruals ratio1 | -4.69% | 18.75% | 5.27% | 1.15% | 3.11% | — | |
| Benchmarks | |||||||
| Cash-Flow-Statement-Based Accruals Ratio, Competitors2 | |||||||
| Activision Blizzard Inc. | 1.25% | -3.14% | 2.67% | -17.52% | — | — | |
| Alphabet Inc. | 8.45% | 11.72% | 17.73% | 12.54% | — | — | |
| Charter Communications Inc. | -2.81% | -2.38% | -0.69% | 5.30% | — | — | |
| Comcast Corp. | -1.17% | 1.21% | 24.41% | 12.14% | — | — | |
| Facebook Inc. | 36.36% | 4.56% | 11.74% | 37.69% | — | — | |
| Netflix Inc. | 4.60% | 35.30% | 44.39% | 39.94% | — | — | |
| Cash-Flow-Statement-Based Accruals Ratio, Sector | |||||||
| Media & Entertainment | 2.82% | 6.47% | 13.24% | 10.14% | 19.78% | — | |
| Cash-Flow-Statement-Based Accruals Ratio, Industry | |||||||
| Communication Services | -0.88% | 1.73% | 10.03% | 9.91% | 9.69% | — | |
Based on: 10-K (filing date: 2020-11-25), 10-K (filing date: 2019-11-20), 10-K (filing date: 2018-11-21), 10-K (filing date: 2017-11-22), 10-K (filing date: 2016-11-23), 10-K (filing date: 2015-11-25).
1 2020 Calculation
Cash-flow-statement-based accruals ratio = 100 × Cash-flow-statement-based aggregate accruals ÷ Avg. net operating assets
= 100 × -6,630 ÷ [(138,226 + 144,420) ÷ 2] = -4.69%
2 Click competitor name to see calculations.
| Financial ratio | Description | The company |
|---|---|---|
| Cash-flow-statement-based accruals ratio | Ratio is found by dividing cash-flow-statement-based aggregate accruals by average net operating assets. | Using the cash-flow-statement-based accruals ratio, Walt Disney Co. improved earnings quality from 2019 to 2020. |