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.
Paying user area
Try for free
Gilead Sciences Inc. pages available for free this week:
- Cash Flow Statement
- Common-Size Balance Sheet: Liabilities and Stockholders’ Equity
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Analysis of Geographic Areas
- Price to FCFE (P/FCFE)
- Present Value of Free Cash Flow to Equity (FCFE)
- Operating Profit Margin since 2005
- Debt to Equity since 2005
- Total Asset Turnover since 2005
- Price to Sales (P/S) since 2005
The data is hidden behind: . Unhide it.
Get full access to the entire website from $10.42/mo, or
get 1-month access to Gilead Sciences Inc. for $24.99.
This is a one-time payment. There is no automatic renewal.
We accept:
Balance-Sheet-Based Accruals Ratio
Gilead Sciences Inc., balance sheet computation of aggregate accruals
US$ in millions
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Operating Assets | ||||||
| Total assets | ||||||
| Less: Cash and cash equivalents | ||||||
| Less: Short-term marketable debt securities | ||||||
| Operating assets | ||||||
| Operating Liabilities | ||||||
| Total liabilities | ||||||
| Less: Current portion of long-term debt and other obligations, net | ||||||
| Less: Long-term debt, net, excluding current portion | ||||||
| Operating liabilities | ||||||
| Net operating assets1 | ||||||
| Balance-sheet-based aggregate accruals2 | ||||||
| Financial Ratio | ||||||
| Balance-sheet-based accruals ratio3 | ||||||
| Benchmarks | ||||||
| Balance-Sheet-Based Accruals Ratio, Competitors4 | ||||||
| AbbVie Inc. | ||||||
| Amgen Inc. | ||||||
| Bristol-Myers Squibb Co. | ||||||
| Danaher Corp. | ||||||
| Eli Lilly & Co. | ||||||
| Johnson & Johnson | ||||||
| Merck & Co. Inc. | ||||||
| Pfizer Inc. | ||||||
| Regeneron Pharmaceuticals Inc. | ||||||
| Thermo Fisher Scientific Inc. | ||||||
| Vertex Pharmaceuticals Inc. | ||||||
| Balance-Sheet-Based Accruals Ratio, Sector | ||||||
| Pharmaceuticals, Biotechnology & Life Sciences | ||||||
| Balance-Sheet-Based Accruals Ratio, Industry | ||||||
| Health Care | ||||||
Based on: 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), 10-K (reporting date: 2020-12-31).
1 2024 Calculation
Net operating assets = Operating assets – Operating liabilities
= – =
2 2024 Calculation
Balance-sheet-based aggregate accruals = Net operating assets2024 – Net operating assets2023
= – =
3 2024 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 financial reporting quality measures over the four-year period reveals notable variations and trends in the company’s financial position and accruals.
- Net Operating Assets
- The net operating assets exhibit a gradual decline from US$41,239 million in 2021 to US$35,966 million in 2024. The decrease is particularly marked in the final year, indicating a reduction of approximately 12% from the initial value in 2021. This trend may reflect changes in the company's asset utilization or operational scale.
- Balance-Sheet-Based Aggregate Accruals
- The aggregate accruals display significant volatility. Starting with negative accruals of US$-976 million in 2021, the figure worsens slightly to US$-1,185 million in 2022, then shifts to a positive value of US$418 million in 2023 before plunging to a large negative accrual of US$-4,506 million in 2024. This abrupt fluctuation, especially the substantial negative value in 2024, suggests increased variability in earnings adjustments or potentially unusual accounting activities within that period.
- Balance-Sheet-Based Accruals Ratio
- The accruals ratio follows a similar pattern of variation. It starts at -2.34% in 2021, moves slightly to -2.92% in 2022, turns positive at 1.04% in 2023, and then sharply declines to -11.79% in 2024. The negative values generally indicate that accruals are reducing reported earnings relative to cash flow, with the extreme negative ratio in 2024 highlighting an intensified divergence during that year. The positive ratio in 2023 indicates a reversal where accruals added to reported earnings.
Overall, the data suggests increasing instability in accrual accounting measures during the reviewed period, especially in 2024. The pronounced swing in both aggregate accruals and the accrual ratio in 2024 could be indicative of changes in accounting policies, operational disruptions, or other extraordinary factors affecting financial reporting quality. Concurrently, the steady decrease in net operating assets points to a contraction in operational resources over time.
Cash-Flow-Statement-Based Accruals Ratio
Gilead Sciences Inc., cash flow statement computation of aggregate accruals
US$ in millions
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Net income attributable to Gilead | ||||||
| Less: Net cash provided by operating activities | ||||||
| Less: Net 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 | ||||||
| AbbVie Inc. | ||||||
| Amgen Inc. | ||||||
| Bristol-Myers Squibb Co. | ||||||
| Danaher Corp. | ||||||
| Eli Lilly & Co. | ||||||
| Johnson & Johnson | ||||||
| Merck & Co. Inc. | ||||||
| Pfizer Inc. | ||||||
| Regeneron Pharmaceuticals Inc. | ||||||
| Thermo Fisher Scientific Inc. | ||||||
| Vertex Pharmaceuticals Inc. | ||||||
| Cash-Flow-Statement-Based Accruals Ratio, Sector | ||||||
| Pharmaceuticals, Biotechnology & Life Sciences | ||||||
| Cash-Flow-Statement-Based Accruals Ratio, Industry | ||||||
| Health Care | ||||||
Based on: 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), 10-K (reporting date: 2020-12-31).
1 2024 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 data reflects key measures related to the quality of annual financial reporting over four consecutive years. The focus is on net operating assets and cash-flow-statement-based aggregate accruals and their ratio.
- Net Operating Assets
- There is a gradual decrease in net operating assets from 41,239 million US dollars in 2021 to 40,054 million in 2022, followed by a slight increase to 40,472 million in 2023. However, a notable decline occurs in 2024, with net operating assets falling to 35,966 million. This downward trend in the final year represents a significant contraction in the asset base utilized for operations.
- Cash-Flow-Statement-Based Aggregate Accruals
- Aggregate accruals were negative in all years, indicating that cash flows from operations exceeded accounting earnings. The magnitude remains fairly stable and moderately negative in 2021 and 2022, at approximately -2,028 million and -2,014 million respectively. In 2023, there is a substantial reduction in aggregate accruals to -76 million, suggesting an improvement in accrual quality or a convergence of cash flows and earnings. However, 2024 sees a dramatic reversal, with aggregate accruals plunging to -6,899 million. This unusually high negative figure may point to irregularities or significant changes in accrual accounting.
- Cash-Flow-Statement-Based Accruals Ratio
- The accruals ratio follows a similar trajectory as aggregate accruals, measured as a percentage of net operating assets. The ratio remains relatively stable and slightly negative at -4.86% in 2021 and -4.95% in 2022, signifying consistent reporting quality. In 2023, the ratio almost neutralizes to -0.19%, indicating near alignment between earnings and cash flows. However, the ratio deteriorates sharply in 2024 to -18.05%, reflecting a substantial divergence that could raise concerns regarding earnings sustainability or financial statement reliability.
Overall, the financial reporting quality indicators show a stable trend through 2022, improvement in 2023, and significant deterioration in 2024. The abrupt increase in negative aggregate accruals and the corresponding drop in net operating assets suggest potentially material changes in accounting policies, operational efficiency, or financial reporting practices that warrant further investigation.