Capital Expenditures Data for Inflation Accounting Studies.

Empirical inflation accounting research often requires the use of capital expenditures data in order to estimate dated layers of long-lived assets. This dated-layering then is used as a basis for computing either general or specific price-level adjustments. However, the definitions and policies employed in the reporting of capital expenditures on Compustat result in data which are not appropriate for this layering objective. It is shown that naive use of this data can lead to a systematic and potentially significant bias in estimating fixed asset ages. More detailed data, perhaps derived from SEC 10-K disclosures of asset acquisitions and retirements, may be required to circumvent this problem and to provide an improved basis for future inflation accounting research.