Human resource accounting is defined as identifying and measuring data about human resources and communicating this information to interested parties. The objectives of HRA are to provide cost information about acquiring, developing, allocating, and maintaining human resources to achieve organizational goals effectively, enable management to monitor human resource use, and determine if human assets are conserved, appreciated or depreciated over time. HRA advantages include providing useful information about an organization's human capital, strengths and weaknesses of employees, and evaluating HR policies and practices effectiveness. Limitations are lack of clear guidelines distinguishing human resource costs and value, measurement problems, and potential lack of employee and union acceptance. HRA valuation methods include monetary approaches like historical cost, replacement cost, opportunity cost, and asset

1. HUMAN RESOURCE
ACCOUNTING
U.KALPANADEVI
MBA

2. DEFINITION
American Association of Accountants(AAA),
“HRA is a process of identifying and
measuring data about human resources and communicating
this information to interested parties”.

3. OBJECTIVES OF HRA
 Provide cost value information about acquisition,
development,allocation and maintenance of human
resources so as to achieve organisational goals in an
effective manner.
 Enable management of the organisation to effectively
monitor the use of human resources.
 Ascertain whether human assets are conserved,appreciated
or depreciated during a given period of time.
 Assist in the development of effective management practices
.

4. ADVANTAGES OF HRA
 HRA provides useful information about the human capital in the
organisation.
 It throws light on the strengths and weakness of the employees
working in the organisation.
 HRA also facilitates management to evaluate the effectiveness of
HR policies and practices.
 It provides valuable information for present as well as potential
investors.
 Helps to control various types of human resource costs.

5. LIMITATIONS
 There are no clear – cut guidelines to differentiate
the ‘cost’ and ‘value’ of human resources.
 HRA also suffers from measurement problems.
 There is also a fear that the employees and trade
unions may not accept the idea.
 There is no empirical evidence available for effective
management of human resources in an organisation.

6. METHODS OF HUMAN RESOURCE
VALUATION
I. Monetary methods
a) Historical Cost Method
b) Replacement Cost Method
c) Opportunity Vost Method
d) Asset Multiplier method

7. II. Non Monetary Methods
a) Expected Realisable value method
b) Discounted Net Present Value of Future
Earnings.