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
Medtronic PLC, balance sheet computation of aggregate accruals
US$ in millions
| Apr 24, 2026 | Apr 25, 2025 | Apr 26, 2024 | Apr 28, 2023 | Apr 29, 2022 | Apr 30, 2021 | ||
|---|---|---|---|---|---|---|---|
| Operating Assets | |||||||
| Total assets | 93,028) | 91,680) | 89,981) | 90,948) | 90,981) | 93,083) | |
| Less: Cash and cash equivalents | 1,949) | 2,218) | 1,284) | 1,543) | 3,714) | 3,593) | |
| Less: Investments | 7,271) | 6,747) | 6,721) | 6,416) | 6,859) | 7,224) | |
| Operating assets | 83,808) | 82,715) | 81,976) | 82,989) | 80,408) | 82,266) | |
| Operating Liabilities | |||||||
| Total liabilities | 42,956) | 43,424) | 39,561) | 39,283) | 38,260) | 41,481) | |
| Less: Current debt obligations | 1,788) | 2,874) | 1,092) | 20) | 3,742) | 11) | |
| Less: Long-term debt | 26,173) | 25,642) | 23,932) | 24,344) | 20,372) | 26,378) | |
| Operating liabilities | 14,995) | 14,908) | 14,537) | 14,919) | 14,146) | 15,092) | |
| Net operating assets1 | 68,813) | 67,807) | 67,439) | 68,070) | 66,262) | 67,174) | |
| Balance-sheet-based aggregate accruals2 | 1,006) | 368) | (631) | 1,808) | (912) | —) | |
| Financial Ratio | |||||||
| Balance-sheet-based accruals ratio3 | 1.47% | 0.54% | -0.93% | 2.69% | -1.37% | — | |
| Benchmarks | |||||||
| Balance-Sheet-Based Accruals Ratio, Competitors4 | |||||||
| Abbott Laboratories | — | 4.88% | 15.62% | 6.06% | -0.73% | — | |
| Elevance Health Inc. | — | 5.08% | 29.70% | 7.14% | 0.32% | — | |
| Intuitive Surgical Inc. | — | -4.16% | 41.97% | 15.55% | -10.21% | — | |
| UnitedHealth Group Inc. | — | 1.05% | 16.02% | 13.41% | 17.32% | — | |
| Balance-Sheet-Based Accruals Ratio, Sector | |||||||
| Health Care Equipment & Services | 0.00% | 1.88% | 14.53% | 8.90% | 6.46% | — | |
| Balance-Sheet-Based Accruals Ratio, Industry | |||||||
| Health Care | 0.00% | 7.67% | 5.49% | 7.79% | 5.30% | — | |
Based on: 10-K (reporting date: 2026-04-24), 10-K (reporting date: 2025-04-25), 10-K (reporting date: 2024-04-26), 10-K (reporting date: 2023-04-28), 10-K (reporting date: 2022-04-29), 10-K (reporting date: 2021-04-30).
1 2026 Calculation
Net operating assets = Operating assets – Operating liabilities
= 83,808 – 14,995 = 68,813
2 2026 Calculation
Balance-sheet-based aggregate accruals = Net operating assets2026 – Net operating assets2025
= 68,813 – 67,807 = 1,006
3 2026 Calculation
Balance-sheet-based accruals ratio = 100 × Balance-sheet-based aggregate accruals ÷ Avg. net operating assets
= 100 × 1,006 ÷ [(68,813 + 67,807) ÷ 2] = 1.47%
4 Click competitor name to see calculations.
The financial data indicates a period of relative stability in net operating assets coupled with fluctuating aggregate accruals, reflecting a dynamic but controlled relationship between reported earnings and cash flow.
- Net Operating Assets Trend
- Net operating assets have remained consistently within a narrow band, starting at 66,262 million USD in 2022 and ending at 68,813 million USD in 2026. This stability suggests a steady operational base with minimal structural shifts in the asset composition over the five-year period.
- Aggregate Accruals Volatility
- Balance-sheet-based aggregate accruals exhibit significant oscillation, shifting from negative 912 million USD in 2022 to a peak of 1,808 million USD in 2023, before reverting to negative 631 million USD in 2024. The values subsequently trended positive through 2025 and 2026, ending at 1,006 million USD. These fluctuations indicate periodic variations in the timing of revenue and expense recognition relative to cash movements.
- Accruals Ratio and Reporting Quality
- The balance-sheet-based accruals ratio fluctuates between a minimum of -1.37% in 2022 and a maximum of 2.69% in 2023. Despite the alternating direction of the ratio, the absolute values remain low and close to zero throughout the period. Such a pattern typically suggests that accruals are not a dominant driver of reported earnings, pointing toward a generally high level of financial reporting quality and a strong correlation between accrual-based earnings and actual cash flow.
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Cash-Flow-Statement-Based Accruals Ratio
Medtronic PLC, cash flow statement computation of aggregate accruals
US$ in millions
| Apr 24, 2026 | Apr 25, 2025 | Apr 26, 2024 | Apr 28, 2023 | Apr 29, 2022 | Apr 30, 2021 | ||
|---|---|---|---|---|---|---|---|
| Net income attributable to Medtronic | 4,801) | 4,662) | 3,676) | 3,758) | 5,039) | 3,606) | |
| Less: Net cash provided by operating activities | 7,330) | 7,044) | 6,787) | 6,039) | 7,346) | 6,240) | |
| Less: Net cash used in investing activities | (2,934) | (1,937) | (2,366) | (3,493) | (1,659) | (2,866) | |
| Cash-flow-statement-based aggregate accruals | 405) | (445) | (745) | 1,212) | (648) | 232) | |
| Financial Ratio | |||||||
| Cash-flow-statement-based accruals ratio1 | 0.59% | -0.66% | -1.10% | 1.80% | -0.97% | — | |
| Benchmarks | |||||||
| Cash-Flow-Statement-Based Accruals Ratio, Competitors2 | |||||||
| Abbott Laboratories | — | -1.12% | 14.32% | 3.55% | -2.08% | — | |
| Elevance Health Inc. | — | 6.97% | 16.15% | 12.87% | 8.35% | — | |
| Intuitive Surgical Inc. | — | -6.85% | 30.74% | 4.54% | -20.88% | — | |
| UnitedHealth Group Inc. | — | 0.69% | 7.71% | 7.40% | 21.73% | — | |
| Cash-Flow-Statement-Based Accruals Ratio, Sector | |||||||
| Health Care Equipment & Services | 0.00% | 0.57% | 8.55% | 5.82% | 8.70% | — | |
| Cash-Flow-Statement-Based Accruals Ratio, Industry | |||||||
| Health Care | 0.00% | 4.65% | 4.00% | 8.59% | 4.25% | — | |
Based on: 10-K (reporting date: 2026-04-24), 10-K (reporting date: 2025-04-25), 10-K (reporting date: 2024-04-26), 10-K (reporting date: 2023-04-28), 10-K (reporting date: 2022-04-29), 10-K (reporting date: 2021-04-30).
1 2026 Calculation
Cash-flow-statement-based accruals ratio = 100 × Cash-flow-statement-based aggregate accruals ÷ Avg. net operating assets
= 100 × 405 ÷ [(68,813 + 67,807) ÷ 2] = 0.59%
2 Click competitor name to see calculations.
The analysis of financial reporting quality indicates a high degree of stability in the asset base coupled with minor fluctuations in the relationship between accrual-based earnings and cash flows. Net operating assets have remained relatively constant over the five-year period, while the accruals ratio shows a pattern of oscillation around zero, suggesting a consistent alignment between reported profits and cash generation.
- Net Operating Assets
- A steady trend is observed in net operating assets, which moved from 66,262 million USD in 2022 to 68,813 million USD by 2026. This minimal variance indicates a stable operational scale and a consistent level of investment in the core operating activities of the organization.
- Cash-flow-statement-based Aggregate Accruals
- Aggregate accruals exhibit volatility, alternating between negative and positive values over the analyzed timeframe. A peak occurred in 2023 at 1,212 million USD, followed by a shift to negative values in 2024 (-745 million USD) and 2025 (-445 million USD), before returning to a positive 405 million USD in 2026. These shifts represent the periodic divergence between accounting earnings and the actual cash flow generated from operations.
- Cash-flow-statement-based Accruals Ratio
- The accruals ratio remains low in magnitude, ranging from a minimum of -1.10% to a maximum of 1.80%. Negative ratios were recorded in 2022 (-0.97%), 2024 (-1.10%), and 2025 (-0.66%), signifying periods where cash flows exceeded accrual earnings. Positive ratios were observed in 2023 (1.80%) and 2026 (0.59%). The fact that the ratio consistently stays within a narrow band near zero suggests high earnings quality and indicates that accruals are not being used to aggressively inflate reported performance.
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