Human resource accounting involves identifying, measuring, and analyzing the potential value of a company's human resources and communicating this information to stakeholders. It assigns a cost to recruiting and training employees based on their future value to the organization. There are different approaches to valuing human resources such as historical cost, replacement cost, and present value of future earnings. While human resource accounting was introduced in India in the 1980s, it is now being adopted more widely by public sector organizations to better account for the value of human capital in financial reporting.
Dissertation on Human Resource Accounting in Airlines industry in Indiashadabjamia88
Dissertation on Human Resource Accounting in Airlines industry in India, with special focus on AirIndia...
It was prepared by Faheem Khan of MTA Master of Tourism Administration from AMU Aligarh...
Human Resource Accounting is very important topic and following presentation is a brief out of what actually goes into human resource accounting. Human Resource is considered to be an Asset of the firm and hence computing its value and showing it in the balance sheet is also important. That is why Human Resource Accounting came into being and is being widely used.
It is well known that employees and their skills, abilities represent a significant asset for organization. It is an serious issue for any organization to measure this value as well as its contribution to the organization.
Dissertation on Human Resource Accounting in Airlines industry in Indiashadabjamia88
Dissertation on Human Resource Accounting in Airlines industry in India, with special focus on AirIndia...
It was prepared by Faheem Khan of MTA Master of Tourism Administration from AMU Aligarh...
Human Resource Accounting is very important topic and following presentation is a brief out of what actually goes into human resource accounting. Human Resource is considered to be an Asset of the firm and hence computing its value and showing it in the balance sheet is also important. That is why Human Resource Accounting came into being and is being widely used.
It is well known that employees and their skills, abilities represent a significant asset for organization. It is an serious issue for any organization to measure this value as well as its contribution to the organization.
Study of Human Resource Accounting Practicesiosrjce
Human Resource Accounting (HRA) was introduced in 1980s, it is the process of identifying,
communicating, and measuring data about human resources. It is highly complicated in today’s market to find
well knowledge, and highly motivated people. But Human Resource is one of the most important operations for
any organization or business. Without the human involvement can lose its efficiency in work, and all the areas
of business and levels human efficiency is required with machine efficiency. Thus companies have to recognize
and appreciate the value of their employees. It is worth and capital investments. The objective of this paper is to
study the Human Resources Accounting practices, to identify challenges and issues, and to give suggestions
based on the findings of the study.
HRA Practises and its Effect on the Business Organisationsijtsrd
Human resource accounting it is the process of identifying, measuring the data about human resource. It is highly complicated in the today's market find well knowledge, coached and highly motivated people. But human resource is most important in any organization for work in efficiency and to effective work of human with the machine efficiency. And it is worth and capital investment. It is helps to invest the investors of the company. The article highlights the significance of human resource valuation and methods to measure the human assets value. The article depicts the advantages of the human resource accounting. Prof. Rekha D. M | Pavithra G R ""HRA Practises and its Effect on the Business Organisations"" Published in International Journal of Trend in Scientific Research and Development (ijtsrd), ISSN: 2456-6470, Volume-3 | Issue-4 , June 2019, URL: https://www.ijtsrd.com/papers/ijtsrd23877.pdf
Paper URL: https://www.ijtsrd.com/management/hrm-and-retail-business/23877/hra-practises-and-its-effect-on-the-business-organisations/prof-rekha-d-m
HRA is a subsection under accounting. In this slides you will learn about;
- meaning and definition
- HRA purpose in an organization
- Objectives
- Advantages
- Disadvantages
- Benefits
- Assumptions
- HRA used by the managers
- Methods of HR valuation and accounting
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1. Prestige institute of
management, gwalior
Class Presentation
of
strategiC hrm
on
human resourCe aCCounting
Presented by:
neha sharma
mba 4 th sem
2. meaning of human resourCe
aCCounting
Human Resources accounting, also known as Human
Asset Accounting, involved identifying, measuring,
capturing, tracking and analyzing the potential of the
human resources of a company and communicating the
resultant information to the stakeholders of the
company. It was a method by which a cost was
assigned to every employee when recruited, and the
value that the employee would generate in the future.
Human Resource accounting reflected the potential of
the human resources of an organization in monetary
terms, in its financial statements.
3. definitions of human resourCe
aCCounting
AAA Definition:
“ The process of identifying and measuring data about human
resources and communicating this information to the interested parties
”
Stephen Knauf (1983):
“ The measurement and quantification of human organizational inputs
such as recruiting, training, experience and commitment ”
Eric Flamholtz
“ Accounting for people as organizational resources. It is the
measurement of the cost and value of people for the organization ”
4. why hra?
It furnishes cost/value information for making management
decisions about acquiring, allocating, developing, and
maintaining human resources in order to attain cost-
effectiveness;
It allows management personnel to monitor effectively the use
of human resources;
It provides a sound and effective basis of human asset control,
that is, whether the asset is appreciated, depleted or conserved;
It helps in the development of management principles by
classifying the financial consequences of various practices.
5. need for hra
HR Accounting is very much needed to provide effective & efficient
management within the organization.
* If there is any change in the structure of manpower, it is HRA which
provides information on it to the management.
* HRA provides qualitative information & also assess the cost incurred
in personnel.
* It gives a platform to the management by providing factors for better
decision-making for future investment.
* The return on Investment on human capital is best evaluated through
HRA.
* HRA communicates to the organization & public about the worth of
human resources & also its proper allocation within the organization.
* HR helps the management in developing principles by classifying the
financial consequences of the various practices.
6. Valuation aPProaChes of
human resourCe
Measurement is arbitrary and there are mainly 2
approaches;
Cost based approaches
Present Value of Future Earning
Cost Based Approaches
1. Historical Cost Approach
2. Replacement Cost Approach
3. Opportunity Cost Approach
7. historiCal Cost aPProaCh
The cost of recruitment, selection, development are
all capitalized and amortized over the useful life time
of the employee. This amortization may be dealt
according to the situation.
Benefits: Easy to operate, Conforms with the
matching principle, Similar to the treatment of other
fixed assets
Shortcomings: Estimation of the useful life time may
not be easy, The value of humans are generally
increasing over time - but this method gives a
declining picture, This method doesn’t actually
measure the value but undermines it
8. rePlaCement Cost
aPProaCh
The cost to replace the existing human resources
are estimated. All costs incurred to attain the
current level of competence of an existing
employee. Created from scratch
Benefits: Is present/ future oriented
Disadvantage: Not always possible to obtain such a
measure (identical replacement), It is hence
subjective
9. oPPortunity Cost
aPProaCh
Is based on economic concept which overcomes the
deficiency in replacement cost app. Measured
through a competitive bidding process within the
entity.
Steps:
1. The entity is divided in to investment centers
2. The investment centre managers bid for scarce
employees they need within the entity
3. The maximum bid price may obtained by the
capitalization of the excess profits generated by the
employee
10. Present Value of future
earnings
Lev and Schwartz (1971) proposed an economic valuation of employees
based on the present value of future earnings, adjusted for the probability of
employees’ death/separation/retirement. This method helps in determining
what an employee’s future contribution is worth today.
According to this model, the value of human capital embodied in a person
who is ‘y’ years old, is the present value of his/her future earnings from
employment and can be calculated by using the following formula:
E(Vy) = Σ Py(t+1) Σ I(T)/(I+R)t-y
T=Y Y
where E (Vy) = expected value of a ‘y’ year old person’s human capital T =
the person’s retirement age Py (t) = probability of the person leaving the
organisation I(t) = expected earnings of the person in period I r = discount
rate
Limitations
The measure is an objective one because it uses widely based statistics such
as census income return and mortality tables.
The measure assigns more weight to averages than to the value of any
specific group or individual
11. inVestment Pattern
The human resource investment usually consists of the following items:-
1) Expenditure on advertisement for recruitment
2) Cost of selection
3) Training cost
4) On the job training cost
5) Subsistence allowance
6) Contribution to provident Fund
7) Educational tour expenses
8) Medical expenses
9) Ex-gratia payments
10) Employee’s Welfare Fund
All these items influence directly or indirectly the human resources and the
productivity of the organization.
12. hra in india
Though Human Resources Accounting was introduced way back in the
1980s, it started gaining popularity in India after it was adopted and
popularized by NLC. Even though the situation prevails, yet, a growing
trend towards the measurement and reporting of human resources
particularly in public sector is noticeable during the past few years. BHEL,
Cement Corporation of India, ONGC, Engineers India Ltd., National
Thermal Corporation, Minerals and Metals Trading Corporation, Madras
Refineries, Oil India Ltd., Associated Cement Companies, SPIC,
Metallurgical and Engineering consultants India Limited, Cochin
Refineries Ltd. Etc. are some of the organizations, which have started
disclosing some valuable information regarding human resources in their
financial statements. It is needless to mention here that, the importance of
human resources in business organization as productive resources was by
and large ignored by the accountants until two decades ago.