Introduction to Compensation and Benefit Design: Applying Finance and Accounting Principles to Global Human Resource Management Systems
CAPEX Versus OPEX
The expressions capital expenses and operating expenses are often used in accounting and finance. Cost or expenditure outlays can either be capitalized (spread out over a period of time) or taken into a specific time period’s profit/loss—in other words, in the time period they were incurred (revenue and expense recognition). This is the difference between capital expenditures (CAPEX) and operating expenditures (OPEX).
With reference to these classifications, employee-related expenditures are classified differently by different groups. The HR-related cost or expenditures can be classified either as CAPEX or OPEX. CAPEX remain capitalized (a balance sheet classification) until these transactions become expenses for a specific time period. HR accounting proponents suggest that for effective management reporting it might be better to aggregate these accounting entries into one account. If done, it gives business decision makers a more complete picture when making strategic and operational decisions affecting employees.