Disaggregated Capital Expenditures

What is it about?

Financial analysts and accounting regulators encourage companies to disclose the disaggregation of total capital expenditures into the portion of capital investment intended to sustain current performance, and the portion invested in new projects/assets to pursue additional opportunities. We provide initial evidence the information in the disaggregated disclosure is potentially useful in forecasting firm performance. Our results provide evidence that disaggregated capital expenditures disclosure is superior to the currently required aggregate capital expenditures disclosure in explaining/forecasting firms' future financial performance. Further, our findings are consistent with analysts incorporating the information in disaggregated capital expenditures into their forecasts.

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