Disaggregated Capital Expenditures

Financial analysts and accounting regulators encourage companies to disclose the disaggregation of total capital expenditures (CAPX) into the portion for sustaining current performance (maintenance CAPX [MCAPX]) and the portion for pursuing additional opportunities (growth CAPX [GCAPX]). Using a han...

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Bibliographic Details
Published in:Accounting horizons 2019-12, Vol.33 (4), p.77-93
Main Authors: Beyer, Brooke D., Herrmann, Donald R., Rapley, Eric T.
Format: Article
Language:English
Subjects:
Analysts
Capital
Capital expenditures
Disclosure
Earnings
Earnings per share
Expenditures
Financial analysis
Financial disclosure
Financial performance
Forecasting
Sales
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Summary:Financial analysts and accounting regulators encourage companies to disclose the disaggregation of total capital expenditures (CAPX) into the portion for sustaining current performance (maintenance CAPX [MCAPX]) and the portion for pursuing additional opportunities (growth CAPX [GCAPX]). Using a hand-collected sample of voluntary disclosures, we document that traditional estimates of disaggregated CAPX components, using currently required financial statement disclosures, are inadequate proxies for actual (disclosed) values of MCAPX and GCAPX. Specifically, we find that estimation errors for disaggregated variables are associated with future financial performance (i.e., changes in sales and earnings), suggesting that disaggregated disclosure information is potentially useful in forecasting. We also find that these estimation errors are associated with analyst forecast revisions of sales and earnings per share, consistent with analysts incorporating disaggregated CAPX information into their forecasts. Our results provide evidence that disaggregated CAPX disclosures are superior to currently required aggregate CAPX disclosure for forecasting firms' financial performance.
ISSN:0888-7993
1558-7975
DOI:10.2308/acch-52475