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
Costco Wholesale Corp., balance sheet computation of aggregate accruals
US$ in millions
| Aug 31, 2025 | Sep 1, 2024 | Sep 3, 2023 | Aug 28, 2022 | Aug 29, 2021 | Aug 30, 2020 | ||
|---|---|---|---|---|---|---|---|
| Operating Assets | |||||||
| Total assets | 77,099) | 69,831) | 68,994) | 64,166) | 59,268) | 55,556) | |
| Less: Cash and cash equivalents | 14,161) | 9,906) | 13,700) | 10,203) | 11,258) | 12,277) | |
| Less: Short-term investments | 1,123) | 1,238) | 1,534) | 846) | 917) | 1,028) | |
| Operating assets | 61,815) | 58,687) | 53,760) | 53,117) | 47,093) | 42,251) | |
| Operating Liabilities | |||||||
| Total liabilities | 47,935) | 46,209) | 43,936) | 43,519) | 41,190) | 36,851) | |
| Less: Current portion of long-term debt | 75) | 103) | 1,081) | 73) | 799) | 95) | |
| Less: Current finance lease liabilities | 78) | 147) | 129) | 245) | 72) | 31) | |
| Less: Long-term debt, excluding current portion | 5,713) | 5,794) | 5,377) | 6,484) | 6,692) | 7,514) | |
| Less: Long-term finance lease liabilities | 1,401) | 1,351) | 1,303) | 1,383) | 980) | 657) | |
| Operating liabilities | 40,668) | 38,814) | 36,046) | 35,334) | 32,647) | 28,554) | |
| Net operating assets1 | 21,147) | 19,873) | 17,714) | 17,783) | 14,446) | 13,697) | |
| Balance-sheet-based aggregate accruals2 | 1,274) | 2,159) | (69) | 3,337) | 749) | —) | |
| Financial Ratio | |||||||
| Balance-sheet-based accruals ratio3 | 6.21% | 11.49% | -0.39% | 20.71% | 5.32% | — | |
| Benchmarks | |||||||
| Balance-Sheet-Based Accruals Ratio, Competitors4 | |||||||
| Target Corp. | 0.70% | 2.06% | 19.69% | 10.33% | -10.90% | — | |
| Walmart Inc. | 5.23% | 6.15% | 0.02% | 1.09% | -6.44% | — | |
| Balance-Sheet-Based Accruals Ratio, Sector | |||||||
| Consumer Staples Distribution & Retail | 0.00% | 6.12% | 2.78% | 4.30% | -5.94% | — | |
| Balance-Sheet-Based Accruals Ratio, Industry | |||||||
| Consumer Staples | 0.00% | 1.15% | 2.58% | 7.61% | -0.13% | — | |
Based on: 10-K (reporting date: 2025-08-31), 10-K (reporting date: 2024-09-01), 10-K (reporting date: 2023-09-03), 10-K (reporting date: 2022-08-28), 10-K (reporting date: 2021-08-29), 10-K (reporting date: 2020-08-30).
1 2025 Calculation
Net operating assets = Operating assets – Operating liabilities
= 61,815 – 40,668 = 21,147
2 2025 Calculation
Balance-sheet-based aggregate accruals = Net operating assets2025 – Net operating assets2024
= 21,147 – 19,873 = 1,274
3 2025 Calculation
Balance-sheet-based accruals ratio = 100 × Balance-sheet-based aggregate accruals ÷ Avg. net operating assets
= 100 × 1,274 ÷ [(21,147 + 19,873) ÷ 2] = 6.21%
4 Click competitor name to see calculations.
- Net Operating Assets
- The net operating assets exhibit a consistent upward trend over the observed periods. Starting at $14,446 million, the value increased steadily each year, reaching $21,147 million by the final period. This pattern indicates ongoing growth in the company’s operational asset base, which may reflect expansion or increased investment in operating resources.
- Balance-sheet-based Aggregate Accruals
- The aggregate accruals show considerable volatility. Initially, there was an increase from $749 million to $3,337 million, followed by a sharp decline to a negative figure of -$69 million in the subsequent period. After this drop, accruals rose again to $2,159 million, then decreased to $1,274 million in the most recent period. This variability suggests fluctuations in the timing of revenue and expense recognition, which may impact earnings quality.
- Balance-sheet-based Accruals Ratio
- Mirroring the pattern of aggregate accruals, the accruals ratio demonstrates significant fluctuations. The ratio started at 5.32%, then peaked at 20.71%, indicating a relatively higher portion of accruals compared to net operating assets. It then dropped sharply to -0.39%, implying a temporary reversal in accruals, before increasing again to 11.49%, and finally decreasing to 6.21%. These movements highlight variability in the accrual component relative to total operating assets, which can influence assessments of earnings quality and financial reporting reliability.
Cash-Flow-Statement-Based Accruals Ratio
Costco Wholesale Corp., cash flow statement computation of aggregate accruals
US$ in millions
| Aug 31, 2025 | Sep 1, 2024 | Sep 3, 2023 | Aug 28, 2022 | Aug 29, 2021 | Aug 30, 2020 | ||
|---|---|---|---|---|---|---|---|
| Net income attributable to Costco | 8,099) | 7,367) | 6,292) | 5,844) | 5,007) | 4,002) | |
| Less: Net cash provided by operating activities | 13,335) | 11,339) | 11,068) | 7,392) | 8,958) | 8,861) | |
| Less: Net cash used in investing activities | (5,311) | (4,409) | (4,972) | (3,915) | (3,535) | (3,891) | |
| Cash-flow-statement-based aggregate accruals | 75) | 437) | 196) | 2,367) | (416) | (968) | |
| Financial Ratio | |||||||
| Cash-flow-statement-based accruals ratio1 | 0.37% | 2.33% | 1.10% | 14.69% | -2.96% | — | |
| Benchmarks | |||||||
| Cash-Flow-Statement-Based Accruals Ratio, Competitors2 | |||||||
| Target Corp. | -1.62% | 1.09% | 18.64% | 7.52% | -18.12% | — | |
| Walmart Inc. | 3.34% | 0.87% | 0.47% | -3.77% | -10.19% | — | |
| Cash-Flow-Statement-Based Accruals Ratio, Sector | |||||||
| Consumer Staples Distribution & Retail | 0.00% | 1.06% | 3.13% | -0.42% | -10.54% | — | |
| Cash-Flow-Statement-Based Accruals Ratio, Industry | |||||||
| Consumer Staples | 0.00% | -0.17% | 2.27% | 4.81% | -4.89% | — | |
Based on: 10-K (reporting date: 2025-08-31), 10-K (reporting date: 2024-09-01), 10-K (reporting date: 2023-09-03), 10-K (reporting date: 2022-08-28), 10-K (reporting date: 2021-08-29), 10-K (reporting date: 2020-08-30).
1 2025 Calculation
Cash-flow-statement-based accruals ratio = 100 × Cash-flow-statement-based aggregate accruals ÷ Avg. net operating assets
= 100 × 75 ÷ [(21,147 + 19,873) ÷ 2] = 0.37%
2 Click competitor name to see calculations.
- Net Operating Assets
- There has been a consistent upward trend in net operating assets over the observed periods. Starting from 14,446 million US dollars in 2021, the figure rose to 21,147 million US dollars by 2025, indicating an overall increase in the company's investment in its core operational assets. The growth appears steady, with notable increments particularly between 2022 and 2024.
- Cash-Flow-Statement-Based Aggregate Accruals
- The aggregate accruals exhibit considerable volatility during the examined timeline. Initially, there was a negative value of -416 million US dollars in 2021, shifting to a significant positive peak of 2,367 million US dollars in 2022. Subsequently, the accruals decreased sharply to 196 million in 2023, then increased to 437 million in 2024, and finally declined again to 75 million US dollars in 2025. This fluctuation suggests irregularities or changes in the timing of accrual recognition relative to cash flows.
- Cash-Flow-Statement-Based Accruals Ratio
- This ratio mirrors the volatility seen in aggregate accruals but on a relative basis. It begins with a negative ratio of -2.96% in 2021, shifts sharply to a high of 14.69% in 2022, and then drops to lower positive percentages in subsequent years, settling at 0.37% in 2025. The marked spike in 2022 suggests a period of elevated accrual activity relative to cash flows, whereas the subsequent moderation indicates stabilization in the financial reporting quality.