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
Nike Inc., balance sheet computation of aggregate accruals
US$ in millions
| May 31, 2025 | May 31, 2024 | May 31, 2023 | May 31, 2022 | May 31, 2021 | May 31, 2020 | ||
|---|---|---|---|---|---|---|---|
| Operating Assets | |||||||
| Total assets | 36,579) | 38,110) | 37,531) | 40,321) | 37,740) | 31,342) | |
| Less: Cash and equivalents | 7,464) | 9,860) | 7,441) | 8,574) | 9,889) | 8,348) | |
| Less: Short-term investments | 1,687) | 1,722) | 3,234) | 4,423) | 3,587) | 439) | |
| Operating assets | 27,428) | 26,528) | 26,856) | 27,324) | 24,264) | 22,555) | |
| Operating Liabilities | |||||||
| Total liabilities | 23,366) | 23,680) | 23,527) | 25,040) | 24,973) | 23,287) | |
| Less: Current portion of long-term debt | —) | 1,000) | —) | 500) | —) | 3) | |
| Less: Notes payable | 5) | 6) | 6) | 10) | 2) | 248) | |
| Less: Long-term debt, excluding current portion | 7,961) | 7,903) | 8,927) | 8,920) | 9,413) | 9,406) | |
| Operating liabilities | 15,400) | 14,771) | 14,594) | 15,610) | 15,558) | 13,630) | |
| Net operating assets1 | 12,028) | 11,757) | 12,262) | 11,714) | 8,706) | 8,925) | |
| Balance-sheet-based aggregate accruals2 | 271) | (505) | 548) | 3,008) | (219) | —) | |
| Financial Ratio | |||||||
| Balance-sheet-based accruals ratio3 | 2.28% | -4.21% | 4.57% | 29.46% | -2.48% | — | |
| Benchmarks | |||||||
| Balance-Sheet-Based Accruals Ratio, Competitors4 | |||||||
| lululemon athletica inc. | 16.25% | -0.29% | 29.58% | 4.99% | 48.47% | — | |
| Balance-Sheet-Based Accruals Ratio, Sector | |||||||
| Consumer Durables & Apparel | 0.00% | -3.65% | 7.74% | 26.43% | 3.32% | — | |
| Balance-Sheet-Based Accruals Ratio, Industry | |||||||
| Consumer Discretionary | 0.00% | 12.07% | 12.01% | 13.04% | 12.78% | — | |
Based on: 10-K (reporting date: 2025-05-31), 10-K (reporting date: 2024-05-31), 10-K (reporting date: 2023-05-31), 10-K (reporting date: 2022-05-31), 10-K (reporting date: 2021-05-31), 10-K (reporting date: 2020-05-31).
1 2025 Calculation
Net operating assets = Operating assets – Operating liabilities
= 27,428 – 15,400 = 12,028
2 2025 Calculation
Balance-sheet-based aggregate accruals = Net operating assets2025 – Net operating assets2024
= 12,028 – 11,757 = 271
3 2025 Calculation
Balance-sheet-based accruals ratio = 100 × Balance-sheet-based aggregate accruals ÷ Avg. net operating assets
= 100 × 271 ÷ [(12,028 + 11,757) ÷ 2] = 2.28%
4 Click competitor name to see calculations.
- Net operating assets
- The net operating assets show a general upward trend over the five-year period. Starting from 8,706 million US dollars in 2021, the value increased significantly to 11,714 million US dollars in 2022. This growth continued, albeit at a slower pace, rising to 12,262 million in 2023 before experiencing a slight decline to 11,757 million in 2024. In 2025, the net operating assets rebounded moderately to 12,028 million. Overall, the net operating assets indicate gradual asset base expansion with some minor fluctuations in the recent years.
- Balance-sheet-based aggregate accruals
- The aggregate accruals exhibit considerable volatility throughout the period. In 2021, the figure was negative at -219 million US dollars, indicating a reduction in accrued items. However, 2022 saw a sharp increase to 3,008 million, a substantial rise suggesting a significant build-up of accruals. This was followed by a notable decrease to 548 million in 2023. The year 2024 experienced a negative value of -505 million, indicating a reversal or reduction in accrued liabilities or assets. Finally, in 2025, the value returned to a positive 271 million, though still moderate compared to earlier peaks. This pattern reflects an uneven accrual management or changes in operating cycle components during the analyzed years.
- Balance-sheet-based accruals ratio
- The accruals ratio, expressed as a percentage of net operating assets, mirrors the fluctuations seen in aggregate accruals but relative to asset size. Starting at -2.48% in 2021, the ratio surged dramatically to 29.46% in 2022, indicating a proportionally large increase in accruals relative to net operating assets. In 2023, this ratio dropped sharply to 4.57%, signifying a substantial normalization. The ratio turned negative again in 2024 to -4.21%, reflecting a net reduction in accruals relative to assets. By 2025, the ratio increased again to 2.28%, signaling a moderate positive accrual level. These variations suggest fluctuating earnings management or variations in financial reporting quality linked to accruals over the years.
Cash-Flow-Statement-Based Accruals Ratio
Nike Inc., cash flow statement computation of aggregate accruals
US$ in millions
| May 31, 2025 | May 31, 2024 | May 31, 2023 | May 31, 2022 | May 31, 2021 | May 31, 2020 | ||
|---|---|---|---|---|---|---|---|
| Net income | 3,219) | 5,700) | 5,070) | 6,046) | 5,727) | 2,539) | |
| Less: Cash provided by operations | 3,698) | 7,429) | 5,841) | 5,188) | 6,657) | 2,485) | |
| Less: Cash (used) provided by investing activities | (275) | 894) | 564) | (1,524) | (3,800) | (1,028) | |
| Cash-flow-statement-based aggregate accruals | (204) | (2,623) | (1,335) | 2,382) | 2,870) | 1,082) | |
| Financial Ratio | |||||||
| Cash-flow-statement-based accruals ratio1 | -1.72% | -21.84% | -11.14% | 23.33% | 32.56% | — | |
| Benchmarks | |||||||
| Cash-Flow-Statement-Based Accruals Ratio, Competitors2 | |||||||
| lululemon athletica inc. | 15.72% | -4.61% | 26.38% | 0.98% | 42.45% | — | |
| Cash-Flow-Statement-Based Accruals Ratio, Sector | |||||||
| Consumer Durables & Apparel | 0.00% | -19.39% | -6.39% | 20.56% | 33.68% | — | |
| Cash-Flow-Statement-Based Accruals Ratio, Industry | |||||||
| Consumer Discretionary | 0.00% | 9.43% | 4.25% | 1.57% | 11.50% | — | |
Based on: 10-K (reporting date: 2025-05-31), 10-K (reporting date: 2024-05-31), 10-K (reporting date: 2023-05-31), 10-K (reporting date: 2022-05-31), 10-K (reporting date: 2021-05-31), 10-K (reporting date: 2020-05-31).
1 2025 Calculation
Cash-flow-statement-based accruals ratio = 100 × Cash-flow-statement-based aggregate accruals ÷ Avg. net operating assets
= 100 × -204 ÷ [(12,028 + 11,757) ÷ 2] = -1.72%
2 Click competitor name to see calculations.
- Net Operating Assets
- The net operating assets have generally exhibited an upward trend from May 31, 2021, through May 31, 2025. Starting at 8,706 million US dollars in 2021, the figure rose sharply to 11,714 million in 2022 and continued a more moderate increase to 12,262 million in 2023. Although there was a slight decline to 11,757 million in 2024, the value rebounded to 12,028 million in 2025. Overall, this indicates a growth in the operational asset base, with minor fluctuations in the mid-term.
- Cash-flow-statement-based Aggregate Accruals
- Aggregate accruals have shown a notable shift from positive to negative values over the periods. In 2021, the value was 2,870 million US dollars, decreasing to 2,382 million in 2022. From 2023 onwards, the values became negative, reaching -1,335 million in 2023 and further declining to -2,623 million in 2024 before a partial recovery to -204 million in 2025. This downward trend signals a reduction in accrued earnings relative to cash flows, possibly reflecting changes in earnings quality or accounting adjustments.
- Cash-flow-statement-based Accruals Ratio
- The accruals ratio, expressed as a percentage, mirrors the pattern seen in aggregate accruals. It started at a relatively high positive value of 32.56% in 2021, then decreased to 23.33% in 2022. From 2023, the ratio turned negative, indicating that cash flows exceeded accrual earnings, with values of -11.14% in 2023 and a further drop to -21.84% in 2024. In 2025, the ratio moved closer to zero, standing at -1.72%. These fluctuations suggest variability in the quality and timing of earnings recognition, with potential implications for financial statement reliability.