This document discusses human resource accounting (HRA). It outlines the objectives of HRA as improving HR management, considering people as assets, and aiding decision making. The importance is providing cost/value information for HR decisions and evaluating HR expenditures. Limitations include a lack of clear procedures for valuation and tax laws not recognizing humans as assets. Costs included in HRA are acquisition, training, welfare, and other costs. Measurement approaches discussed are historical cost, replacement cost, opportunity cost, and standard cost models. The cost approach views HR as both an expense and an asset based on costs incurred.

2. 
 Introduction
 Objectives of HRA
 Importance of HRA
 Limitations
 Cost of Human Resources
 Measurements in HRA
 Cost Approach
Contents

3. 
 Process of identifying and measuring data about
human resources and communicating this
information to interested parties
 Quantification of the economic value of the people in
an organization
 Measurement and reporting of the cost and value of
people in organizational resources : Flamholtz
 Art of valuing, recording and presenting
systematically the worth of human resources in the
books of account of an organization
Introduction

4. 
1. Valuation of human resources
2. Recording the valuation in the books of account
3. Disclosure of the information in the financial
statements of the business
Contd…

5. 
 Improve management by analyzing investment in
HR
 Consider people as its asset
 Attract and retain qualified people
 Profile the organization in financial terms
 To have an analysis of the human asset
 To aid in the development of management
principles, and proper decision making for the future
Objectives

6. 
 Furnishes cost/value information for making management decisions about
acquiring, allocating, developing, and maintaining human resources in
order to attain cost-effectiveness
 Helps the management in the employment, locating and utilization of
human resources
 Helps in deciding the transfers, promotion, training and retrenchment of
human resources
 Assists in evaluating the expenditure incurred for imparting further
education and training in employees in terms of the benefits derived by
the firm
Importance of HRA

7. 
 Management tool designed to assist senior management in
understanding the long term cost and benefit implications of
their HR decisions
 Helps in identifying the causes of high labour turnover at
various levels and taking preventive measures to contain it
 Helps in identifying improper or under-utilization of physical
assets or human resource or both
 Provides valuable information for persons interested in making
long term investment in the firm
Contd…

8. 
 No specific procedure for finding cost and value of
human resources of an organization
 Form and manner of including HRA value in the
financial statement is not clear
 Employee with a comparatively low value may feel
discouraged
 Tax laws do not recognize human beings as assets
Limitations

9. Cost of
Human
Resources
Acquisition cost
-Recruitment Cost
-Selection Cost
-Placement Cost
-Campus Interview Cost
Training (Development)
cost
-Formal Training Cost
-On the Job Training Cost
-Special Training
-Development Programmes
Welfare Cost
-Medical Expenditure
-Canteen Expenditure
-Specific and General Allowances
-Children Welfare Expenses
-Other Welfare Expenditure
Other Costs
-Safety Expenditure
-Ex-gratia
-Multi-trade incentives
-Rewarding Suggestions

10. 
Measurements in HRA
•Historical Cost
•Replacement Cost
•Opportunity Cost
•Standard Cost
Cost based approaches:
•The Lev and Schwartz Model (Present value of future earnings method)
•The Eric Flamholtz Model (Reward Valuation method)
•Morse Model (Net Benefit Model)
Monetary value based approaches:
•Likert Model
•The Flamholtz Model
•Ogan Model (Certainity Equivalent Net Benefit Model)
Non- monetary value -based approaches:

11. 
Cost
It is a sacrifice incurred to obtain some anticipated
benefit or service
Two portions :
Expense
Asset
COST APPROACH

12. 
 Historical cost
Sacrifice that was made to acquire and develop the
resource
 Opportunity cost
Money to be spent on HR was spent on something else
 Replacement cost
Cost incurred in the replacement of present employees
Types of Cost