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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Booking Holdings Inc. pages available for free this week:
- Statement of Comprehensive Income
- Balance Sheet: Assets
- Analysis of Short-term (Operating) Activity Ratios
- Analysis of Geographic Areas
- Common Stock Valuation Ratios
- Operating Profit Margin since 2005
- Current Ratio since 2005
- Debt to Equity since 2005
- Price to Book Value (P/BV) since 2005
- Price to Sales (P/S) since 2005
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Balance-Sheet-Based Accruals Ratio
Booking Holdings 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 | ||||||
| Less: Cash and cash equivalents | ||||||
| Less: Short-term investments | ||||||
| Operating assets | ||||||
| Operating Liabilities | ||||||
| Total liabilities | ||||||
| Less: Current finance lease liabilities | ||||||
| Less: Short-term debt | ||||||
| Less: Non-current finance lease liabilities | ||||||
| Less: Long-term debt | ||||||
| Operating liabilities | ||||||
| Net operating assets1 | ||||||
| Balance-sheet-based aggregate accruals2 | ||||||
| Financial Ratio | ||||||
| Balance-sheet-based accruals ratio3 | ||||||
| Benchmarks | ||||||
| Balance-Sheet-Based Accruals Ratio, Competitors4 | ||||||
| Airbnb Inc. | ||||||
| Chipotle Mexican Grill Inc. | ||||||
| DoorDash, Inc. | ||||||
| McDonald’s Corp. | ||||||
| Starbucks Corp. | ||||||
| Balance-Sheet-Based Accruals Ratio, Sector | ||||||
| Consumer Services | ||||||
| Balance-Sheet-Based Accruals Ratio, Industry | ||||||
| Consumer Discretionary | ||||||
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
= – =
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 balance-sheet-based accruals ratio exhibits substantial fluctuation over the observed period. Net operating assets demonstrate a shift from positive values to negative values, while aggregate accruals consistently remain negative. The accruals ratio itself presents a complex pattern, warranting further investigation.
- Net Operating Assets
- Net operating assets decreased significantly from US$2,924 million in 2022 to negative US$1,175 million in 2023. This decline continued through 2024, reaching negative US$3,553 million, and further deteriorated to negative US$4,039 million in 2025. The consistent negative trend suggests a reduction in the company’s operating assets relative to its liabilities.
- Balance-Sheet-Based Aggregate Accruals
- Balance-sheet-based aggregate accruals are negative throughout the period, indicating that net income is not fully supported by cash flows from operations. The accruals decreased from negative US$3,038 million in 2022 to negative US$4,099 million in 2023, then increased to negative US$2,378 million in 2024, and finally to negative US$486 million in 2025. The magnitude of these accruals suggests a considerable reliance on non-cash accounting practices.
- Balance-Sheet-Based Accruals Ratio
- In 2022, the balance-sheet-based accruals ratio was -68.38%. A dramatic increase in the ratio occurred in 2023, reaching -468.72%. Values for 2024 and 2025 are not available. The substantial negative value in 2023 indicates that accruals significantly exceeded net operating assets, potentially signaling aggressive accounting practices or a substantial divergence between reported earnings and underlying cash flows. The absence of values for subsequent years limits the ability to assess the sustainability of this trend.
The observed patterns suggest a potential need for further scrutiny of the company’s accounting policies and their impact on reported financial performance. The increasing negative accruals ratio, particularly the significant value in 2023, warrants a detailed investigation into the underlying drivers of these accruals and their implications for the quality of earnings.
Cash-Flow-Statement-Based Accruals Ratio
Booking Holdings Inc., cash flow statement computation of aggregate accruals
US$ in millions
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| Net income | ||||||
| Less: Net cash provided by operating activities | ||||||
| Less: Net cash (used in) provided by investing activities | ||||||
| Cash-flow-statement-based aggregate accruals | ||||||
| Financial Ratio | ||||||
| Cash-flow-statement-based accruals ratio1 | ||||||
| Benchmarks | ||||||
| Cash-Flow-Statement-Based Accruals Ratio, Competitors2 | ||||||
| Airbnb Inc. | ||||||
| Chipotle Mexican Grill Inc. | ||||||
| DoorDash, Inc. | ||||||
| McDonald’s Corp. | ||||||
| Starbucks Corp. | ||||||
| Cash-Flow-Statement-Based Accruals Ratio, Sector | ||||||
| Consumer Services | ||||||
| Cash-Flow-Statement-Based Accruals Ratio, Industry | ||||||
| Consumer Discretionary | ||||||
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 × ÷ [( + ) ÷ 2] =
2 Click competitor name to see calculations.
The information presents a review of net operating assets and cash-flow-statement-based accruals over a four-year period. A significant fluctuation is observed in net operating assets, transitioning from a positive value in 2022 to negative values in subsequent years, with increasing magnitude. Accruals, as measured by the cash-flow-statement-based aggregate accruals, are consistently negative throughout the period, and also exhibit considerable variation in absolute value.
- Net Operating Assets
- Net operating assets decreased substantially from US$2,924 million in 2022 to negative US$1,175 million in 2023. This decline continued through 2024 and 2025, reaching negative US$3,553 million and negative US$4,039 million, respectively. The consistent negative trend suggests a potential reduction in operational investments or an increase in operational liabilities.
- Cash-Flow-Statement-Based Aggregate Accruals
- Cash-flow-statement-based aggregate accruals were negative US$2,978 million in 2022. In 2023, these accruals decreased significantly to negative US$4,541 million. The value increased to negative US$2,570 million in 2024, before decreasing again to negative US$3,692 million in 2025. The negative accruals indicate that net income is not fully supported by cash flows from operations, suggesting potential reliance on non-cash accounting practices.
- Cash-Flow-Statement-Based Accruals Ratio
- The cash-flow-statement-based accruals ratio was -67.03% in 2022. A substantial decrease is observed in 2023, with the ratio reaching -519.27%. Values for 2024 and 2025 are not available. The extremely high negative ratio in 2023 suggests a considerable divergence between reported earnings and actual cash generation, potentially raising concerns about the quality of earnings. The ratio’s magnitude warrants further investigation into the underlying drivers of accruals.
The combined trends suggest a growing disconnect between reported earnings and cash flows. The increasing negative net operating assets, coupled with consistently negative accruals and a dramatically negative accruals ratio in 2023, may indicate aggressive accounting practices or underlying operational challenges. The absence of accruals ratio values for 2024 and 2025 limits the ability to assess whether the 2023 anomaly was an isolated event or part of a continuing pattern.