Human resource accounting is an attempt to identify and report investments made in an organization's human resources, which are not currently accounted for in conventional accounting practices. It involves measuring the costs incurred by organizations to recruit, select, hire, train and develop employees, and determining the economic value of human resources to the organization. Proponents argue it provides benefits like helping ascertain return on investment in employees, indicating labor intensity, and providing information to investors. However, it also faces limitations such as lack of a single agreed-upon valuation method, uncertainty around employee tenure, potential for exploitation, and lack of perfect knowledge about future returns from human resources. The concept has evolved over several stages from initial academic interest to widespread research and experiments by organizations, followed
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.
HUMAN RESOURCES ACCOUNTING: AN ACCOUNTING TOOL FOR EFFECTIVE MANAGEMENT OF OR...paperpublications3
Abstract: The study explores and examines the scope of Human Resource Accounting towards effective management of Human Resources in the organization. As a phenomenon HRA attempts to valuate human resources in the organization, while it’s implemented in several global organizations some organizations have found the process beneficial and on other hand some have given away the concept of HRA in their accounting procedures. This research attempts to find a suitable arrangement to benefit organizations in using this methodology.
Human resource accounting (HRA) involves treating expenditures related to human resources as assets rather than expenses. It provides useful information for planning, personnel policies, utilizing human resources effectively, and attracting the best employees. There are cost-based models that value human resources based on historical or replacement costs, and economic models that use opportunity costs or discount future wages to determine present value. Common models include capitalizing acquisition and training costs, using replacement costs, and discounting expected future salaries to calculate present value. HRA can provide valuable information to managers and investors.
This document provides an overview of human resource accounting (HRA), including its historical development, objectives, methodology, scope, and limitations. Some key points:
1. HRA aims to assign monetary values to human resources and include them as assets on corporate balance sheets in order to improve management decision-making.
2. The concept of HRA began emerging in the 1960s and grew through the 1970s, but interest declined in the 1980s before renewing in the 1990s as economies shifted to more service-based models reliant on human capital.
3. Methods to calculate the costs and values of human resources have been proposed but remain imperfect, with limitations including uncertainty around employee tenure and potential negative impacts
This document provides an introduction to human resource accounting (HRA). It discusses how HRA involves accounting for expenditures related to human resources as assets. It explains that HRA consists of valuing human resources and recording this information in financial statements to communicate it to interested parties. The document also outlines some of the key benefits of HRA, such as helping management with decisions around staffing, training, and performance evaluation.
This document provides an introduction to human resource accounting. It discusses the development of human resource accounting as a concept to address the failure of traditional accounting practices to properly value human resources. The objectives of human resource accounting are outlined, including quantifying the value of human capital as an organizational asset. A brief historical overview is given of early attempts to assign monetary value to human resources and the evolution of human resource accounting models over time.
Human resource accounting aims to provide managers with information on the cost and value of an organization's human resources. It involves identifying, measuring, and reporting investments in activities like recruiting, hiring, training, and developing employees. The objectives of human resource accounting include improving management decision-making regarding human resources, considering people as assets, and presenting the organization's financial position. However, there are also limitations to human resource accounting, such as uncertainty around valuing human resources and difficulties determining how to include human resource values in financial statements.
Mr. Vishwanath Bhanuse, a teaching assistant in the Department of Studies in Commerce at Rani Channamma University P.G Center in Jamkhandi, refers to human resources accounting and its importance. Human resource accounting aims to measure the cost and value of people within an organization. It helps management make informed decisions regarding recruitment, training, utilization and retention of employees. Tracking such costs and values provides useful information for strategic human resource and financial planning.
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.
HUMAN RESOURCES ACCOUNTING: AN ACCOUNTING TOOL FOR EFFECTIVE MANAGEMENT OF OR...paperpublications3
Abstract: The study explores and examines the scope of Human Resource Accounting towards effective management of Human Resources in the organization. As a phenomenon HRA attempts to valuate human resources in the organization, while it’s implemented in several global organizations some organizations have found the process beneficial and on other hand some have given away the concept of HRA in their accounting procedures. This research attempts to find a suitable arrangement to benefit organizations in using this methodology.
Human resource accounting (HRA) involves treating expenditures related to human resources as assets rather than expenses. It provides useful information for planning, personnel policies, utilizing human resources effectively, and attracting the best employees. There are cost-based models that value human resources based on historical or replacement costs, and economic models that use opportunity costs or discount future wages to determine present value. Common models include capitalizing acquisition and training costs, using replacement costs, and discounting expected future salaries to calculate present value. HRA can provide valuable information to managers and investors.
This document provides an overview of human resource accounting (HRA), including its historical development, objectives, methodology, scope, and limitations. Some key points:
1. HRA aims to assign monetary values to human resources and include them as assets on corporate balance sheets in order to improve management decision-making.
2. The concept of HRA began emerging in the 1960s and grew through the 1970s, but interest declined in the 1980s before renewing in the 1990s as economies shifted to more service-based models reliant on human capital.
3. Methods to calculate the costs and values of human resources have been proposed but remain imperfect, with limitations including uncertainty around employee tenure and potential negative impacts
This document provides an introduction to human resource accounting (HRA). It discusses how HRA involves accounting for expenditures related to human resources as assets. It explains that HRA consists of valuing human resources and recording this information in financial statements to communicate it to interested parties. The document also outlines some of the key benefits of HRA, such as helping management with decisions around staffing, training, and performance evaluation.
This document provides an introduction to human resource accounting. It discusses the development of human resource accounting as a concept to address the failure of traditional accounting practices to properly value human resources. The objectives of human resource accounting are outlined, including quantifying the value of human capital as an organizational asset. A brief historical overview is given of early attempts to assign monetary value to human resources and the evolution of human resource accounting models over time.
Human resource accounting aims to provide managers with information on the cost and value of an organization's human resources. It involves identifying, measuring, and reporting investments in activities like recruiting, hiring, training, and developing employees. The objectives of human resource accounting include improving management decision-making regarding human resources, considering people as assets, and presenting the organization's financial position. However, there are also limitations to human resource accounting, such as uncertainty around valuing human resources and difficulties determining how to include human resource values in financial statements.
Mr. Vishwanath Bhanuse, a teaching assistant in the Department of Studies in Commerce at Rani Channamma University P.G Center in Jamkhandi, refers to human resources accounting and its importance. Human resource accounting aims to measure the cost and value of people within an organization. It helps management make informed decisions regarding recruitment, training, utilization and retention of employees. Tracking such costs and values provides useful information for strategic human resource and financial planning.
The document provides an overview of human resource accounting (HRA), including its history, objectives, and limitations. It discusses how HRA aims to assign monetary values to human resources and account for them as organizational assets. Key points include:
- HRA emerged from research showing conventional accounting failed to value human resources. It seeks to measure costs of acquiring, developing, and maintaining employees, and assess their economic value.
- Objectives are to provide management information for decision-making regarding human resources and consider people as organizational assets. This helps evaluate return on investment in human capital.
- However, limitations exist as precisely valuing human resources is difficult due to uncertainties around employee tenure and lack of agreed-upon valuation
Human resource accounting is a method used to quantify the value of employees to an organization. It involves measuring costs related to recruiting, training, and developing employees. The objectives of human resource accounting are to properly measure and account for costs associated with human resources, ensure resources are being utilized effectively, and determine if investments in employee training and development are providing a return to the organization. Some common methods used in human resource accounting are the historical cost method, replacement cost method, and economic value method, which assign monetary values to employees based on past costs or future earnings potential. Non-monetary methods include the expected realization value method and discounted present value of future earnings method.
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 notes for mba hrRoneeSingh
Human resource accounting is defined as identifying, measuring, and reporting on a company's human resources. It treats people as assets rather than costs. There are several approaches to valuing human resources, including historical cost, replacement cost, and models that determine the present value of future earnings or net benefits of employees. Tracking the costs and value of human resources can help companies with strategic planning, investment decisions, and understanding their overall strengths. However, valuing people as assets is complex and controversial.
Human resource accounting aims to value and account for human resources as organizational assets. There are two main approaches: human resource cost accounting, which deals with accounting for investment in developing employee skills; and human resource value accounting, which attempts to place a monetary value on employees. Several models have been developed for human resource value accounting, including the Lev and Schwartz model, Flamholtz model, Giles and Robinson's human asset multiplier method, and Hermanson's unpurchased goodwill and adjusted discounted future wage models. Implementing human resource accounting provides quantitative information to support decision making around areas like training, recruitment, and resource allocation. However, limitations include uncertainty around employee tenure and difficulty measuring individual contributions to organizational effectiveness.
Human resource accounting involves measuring the cost and value of people to an organization. It includes measuring recruitment, training, and development costs incurred by the organization and assessing the economic value employees provide. There are two main aspects of human resource accounting: human resource cost accounting, which accounts for investment in developing human resources, and human resource value accounting, which assigns monetary values to human assets. Various approaches to valuing human resources include historical cost, replacement cost, and opportunity cost approaches. While human resource accounting provides useful information for decision making, there are also limitations such as uncertainty around employee tenure and lack of standardized valuation methods.
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.
Human Resource Accounting is the process of identifying and measuring data about human resources and communicating this information. It involves measuring costs related to recruiting, selecting, hiring, training, and developing employees. There are several methods for valuing human resources as assets, including historical cost, replacement cost, opportunity cost, standard cost, and economic valuation. Measuring the value of human resources can provide information for planning, utilization, motivation, and making personnel policies. However, valuing people as assets also faces challenges due to uncertainty and measurement problems.
This document provides an overview of human resource accounting. It discusses the development of human resource accounting concepts over time, beginning with early attempts in the 17th century to assign monetary value to human assets. It then outlines some of the key models and approaches that have been used historically, including the historical cost approach developed by RG Barry Corporation in 1967. The document also discusses the importance of properly valuing human resources as key organizational assets and the need for accounting standards to reflect this value. Overall, the document provides a concise history of the field of human resource accounting and highlights its goal of assigning monetary values to employee knowledge, skills, and contributions.
Human Resource Accounting and Auditing PPTSWATI PRASAD
Simple and easy way to understand HR Accounting and Auditing in this ppt.
https://www.youtube.com/watch?v=cRelrckyFMk use this link for Financial Management Chapter 1 for all students.
The document discusses various aspects of human resource accounting (HRA), including:
1. The objectives of HRA are to improve management decision making regarding human resources as assets, attracting and retaining qualified employees, and analyzing investments in human capital.
2. Several approaches to valuing human resources are described, including historical cost, replacement cost, and opportunity cost models. Specific models like the Lev and Schwartz model and Eric Flamholtz model are also covered.
3. The limitations of HRA are that there is no set methodology, how to record values in financial statements is unclear, and tax laws do not recognize people as assets.
Human Resource Accounting (1) UNIT 5 .pptxektasingh88134
The document discusses human resource accounting (HRA), which aims to measure the cost and value of human resources to organizations. It covers the development of HRA, key concepts, information needs, methods for measuring original costs and replacement costs of human resources, models for determining monetary and non-monetary value of human resources, and the phases of designing and implementing an HRA system. The document provides an overview of the topic and highlights some challenges in applying HRA methods and obtaining valid data.
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.
This document discusses human resource accounting (HRA). It defines HRA and provides different perspectives on defining it. Several methods for valuing human resources are described, including historical cost, standard cost, present value of future earnings, etc. The uses and benefits of HRA for management decision making, planning, and other functions are outlined. HR auditing is also discussed as a tool to evaluate HR performance and effectiveness. Different approaches to conducting an HR audit are presented.
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
What Is Human Resource Accounting
The difference in Human Resource Management and Human Resource Accounting
History of Human Resource Accounting
Importance of Human Resource Accounting
Need For Human Resource Accounting
Objectives of Human Resource Accounting
Methods of Valuation of Human Assets
Advantages of Human Resource Accounting
Problems in Human Resource Accounting
Human Resource Structure in Infosys
Place in India of Human Resource Accounting
Human Resource Accounting (HRA) means to measure the cost and value of the people (i.e. of employees and managers) in the organization. It measures the cost incurred to recruit, hire, train and develop employees and managers.
A Study on Human Resource Accounting Practices in Indiaijtsrd
This document discusses human resource accounting practices in India. It provides background on human resource accounting, which aims to identify and report investments in an organization's human resources. There are two main approaches - the cost approach and value approach. The cost approach in India, also called the acquisition cost model, measures costs related to recruiting, training, and developing employees. The replacement cost approach measures costs to replace an employee. While some large Indian companies practice human resource accounting, it has not been widely adopted due to a lack of accounting standards and statutory requirements in India. The document outlines benefits of human resource accounting such as improved decision making and return on investment calculations.
This document discusses human resource accounting and provides definitions, objectives, importance, and methods of valuation. It can be summarized as follows:
Human resource accounting is defined as identifying and measuring data about human resources and communicating this information. It aims to furnish cost and value information to aid in proper decision making and facilitate valuation of human assets. Historical attempts to value human resources date back to the 17th century. Methods of valuation include cost-based approaches like historical cost and replacement cost, and non-monetary approaches. Human resource accounting provides important benefits to management in areas like employment, utilization, and evaluation of training expenditures.
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Stone Art Hub offers the best competitive Marble Pricing in Dubai, ensuring affordability without compromising quality. With a wide range of exquisite marble options to choose from, you can enhance your spaces with elegance and sophistication. For inquiries or orders, contact us at ☎ 9928909666. Experience luxury at unbeatable prices.
The document provides an overview of human resource accounting (HRA), including its history, objectives, and limitations. It discusses how HRA aims to assign monetary values to human resources and account for them as organizational assets. Key points include:
- HRA emerged from research showing conventional accounting failed to value human resources. It seeks to measure costs of acquiring, developing, and maintaining employees, and assess their economic value.
- Objectives are to provide management information for decision-making regarding human resources and consider people as organizational assets. This helps evaluate return on investment in human capital.
- However, limitations exist as precisely valuing human resources is difficult due to uncertainties around employee tenure and lack of agreed-upon valuation
Human resource accounting is a method used to quantify the value of employees to an organization. It involves measuring costs related to recruiting, training, and developing employees. The objectives of human resource accounting are to properly measure and account for costs associated with human resources, ensure resources are being utilized effectively, and determine if investments in employee training and development are providing a return to the organization. Some common methods used in human resource accounting are the historical cost method, replacement cost method, and economic value method, which assign monetary values to employees based on past costs or future earnings potential. Non-monetary methods include the expected realization value method and discounted present value of future earnings method.
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 notes for mba hrRoneeSingh
Human resource accounting is defined as identifying, measuring, and reporting on a company's human resources. It treats people as assets rather than costs. There are several approaches to valuing human resources, including historical cost, replacement cost, and models that determine the present value of future earnings or net benefits of employees. Tracking the costs and value of human resources can help companies with strategic planning, investment decisions, and understanding their overall strengths. However, valuing people as assets is complex and controversial.
Human resource accounting aims to value and account for human resources as organizational assets. There are two main approaches: human resource cost accounting, which deals with accounting for investment in developing employee skills; and human resource value accounting, which attempts to place a monetary value on employees. Several models have been developed for human resource value accounting, including the Lev and Schwartz model, Flamholtz model, Giles and Robinson's human asset multiplier method, and Hermanson's unpurchased goodwill and adjusted discounted future wage models. Implementing human resource accounting provides quantitative information to support decision making around areas like training, recruitment, and resource allocation. However, limitations include uncertainty around employee tenure and difficulty measuring individual contributions to organizational effectiveness.
Human resource accounting involves measuring the cost and value of people to an organization. It includes measuring recruitment, training, and development costs incurred by the organization and assessing the economic value employees provide. There are two main aspects of human resource accounting: human resource cost accounting, which accounts for investment in developing human resources, and human resource value accounting, which assigns monetary values to human assets. Various approaches to valuing human resources include historical cost, replacement cost, and opportunity cost approaches. While human resource accounting provides useful information for decision making, there are also limitations such as uncertainty around employee tenure and lack of standardized valuation methods.
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.
Human Resource Accounting is the process of identifying and measuring data about human resources and communicating this information. It involves measuring costs related to recruiting, selecting, hiring, training, and developing employees. There are several methods for valuing human resources as assets, including historical cost, replacement cost, opportunity cost, standard cost, and economic valuation. Measuring the value of human resources can provide information for planning, utilization, motivation, and making personnel policies. However, valuing people as assets also faces challenges due to uncertainty and measurement problems.
This document provides an overview of human resource accounting. It discusses the development of human resource accounting concepts over time, beginning with early attempts in the 17th century to assign monetary value to human assets. It then outlines some of the key models and approaches that have been used historically, including the historical cost approach developed by RG Barry Corporation in 1967. The document also discusses the importance of properly valuing human resources as key organizational assets and the need for accounting standards to reflect this value. Overall, the document provides a concise history of the field of human resource accounting and highlights its goal of assigning monetary values to employee knowledge, skills, and contributions.
Human Resource Accounting and Auditing PPTSWATI PRASAD
Simple and easy way to understand HR Accounting and Auditing in this ppt.
https://www.youtube.com/watch?v=cRelrckyFMk use this link for Financial Management Chapter 1 for all students.
The document discusses various aspects of human resource accounting (HRA), including:
1. The objectives of HRA are to improve management decision making regarding human resources as assets, attracting and retaining qualified employees, and analyzing investments in human capital.
2. Several approaches to valuing human resources are described, including historical cost, replacement cost, and opportunity cost models. Specific models like the Lev and Schwartz model and Eric Flamholtz model are also covered.
3. The limitations of HRA are that there is no set methodology, how to record values in financial statements is unclear, and tax laws do not recognize people as assets.
Human Resource Accounting (1) UNIT 5 .pptxektasingh88134
The document discusses human resource accounting (HRA), which aims to measure the cost and value of human resources to organizations. It covers the development of HRA, key concepts, information needs, methods for measuring original costs and replacement costs of human resources, models for determining monetary and non-monetary value of human resources, and the phases of designing and implementing an HRA system. The document provides an overview of the topic and highlights some challenges in applying HRA methods and obtaining valid data.
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.
This document discusses human resource accounting (HRA). It defines HRA and provides different perspectives on defining it. Several methods for valuing human resources are described, including historical cost, standard cost, present value of future earnings, etc. The uses and benefits of HRA for management decision making, planning, and other functions are outlined. HR auditing is also discussed as a tool to evaluate HR performance and effectiveness. Different approaches to conducting an HR audit are presented.
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
What Is Human Resource Accounting
The difference in Human Resource Management and Human Resource Accounting
History of Human Resource Accounting
Importance of Human Resource Accounting
Need For Human Resource Accounting
Objectives of Human Resource Accounting
Methods of Valuation of Human Assets
Advantages of Human Resource Accounting
Problems in Human Resource Accounting
Human Resource Structure in Infosys
Place in India of Human Resource Accounting
Human Resource Accounting (HRA) means to measure the cost and value of the people (i.e. of employees and managers) in the organization. It measures the cost incurred to recruit, hire, train and develop employees and managers.
A Study on Human Resource Accounting Practices in Indiaijtsrd
This document discusses human resource accounting practices in India. It provides background on human resource accounting, which aims to identify and report investments in an organization's human resources. There are two main approaches - the cost approach and value approach. The cost approach in India, also called the acquisition cost model, measures costs related to recruiting, training, and developing employees. The replacement cost approach measures costs to replace an employee. While some large Indian companies practice human resource accounting, it has not been widely adopted due to a lack of accounting standards and statutory requirements in India. The document outlines benefits of human resource accounting such as improved decision making and return on investment calculations.
This document discusses human resource accounting and provides definitions, objectives, importance, and methods of valuation. It can be summarized as follows:
Human resource accounting is defined as identifying and measuring data about human resources and communicating this information. It aims to furnish cost and value information to aid in proper decision making and facilitate valuation of human assets. Historical attempts to value human resources date back to the 17th century. Methods of valuation include cost-based approaches like historical cost and replacement cost, and non-monetary approaches. Human resource accounting provides important benefits to management in areas like employment, utilization, and evaluation of training expenditures.
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Stone Art Hub offers the best competitive Marble Pricing in Dubai, ensuring affordability without compromising quality. With a wide range of exquisite marble options to choose from, you can enhance your spaces with elegance and sophistication. For inquiries or orders, contact us at ☎ 9928909666. Experience luxury at unbeatable prices.
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Customer Journey Map
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3. HRA - Concept
“Human Resource Accounting” is the offshoot of various research studies
conducted in the areas of accounting and finance.
Human resource is an asset whose value gets appreciated over the period of time
provided placed, applied and developed in the right direction.
Till the recent past, organizations took few efforts to assign monetary value to
human resource in its accounting practice.
Behavioural scientists initiated efforts to develop appropriate methodology for
finding out the value of human resource to the organization. They were against the
conventional accounting practice for its failure to value the human resource of an
organization along with physical resources.
4. The traditional concept suggested that expenditure on human resource is treated as a
charge against revenue as it does not create any physical asset.
At present there is a change in this concept and the expenses incurred on any asset
(as human resources) should be treated as capital expenditure as it yields benefits
which can be derived for a long period of time and could be measured in monetary
terms.
The following are the reasons why Human Resources Accounting has been
receiving so much attention in the recent years.
1. Firstly, there is genuine need for reliable and complete management of human resources.
2. Secondly, a traditional framework of Accounting is in the process to include a much broader
set of measurement than was possible in the past.
3. The people are the most important assets of an organization but the value of this asset yet to
appear in financial statements.
5. Human Resource Accounting is the measurement of the cost and value of
people to the organization.
It involves measuring costs incurred by the organizations to recruit, select,
hire, train and develop employees and judge their economic value to the
organization.
Human resource accounting can be defined as a system of accounting which
consider human resources as an asset and all the financial expenses on human
resources such as wages, salary, training etc. are recorded in the books of
account.
6. Definition - HRA
According to R. L. Woodruff:
"Human resource accounting is an attempt to identify and report investment
made in human resource of an organisation that are presently not accounted for
in conventional accounting practice".
According to American Accounting Association committee:
"Human resource accounting is the process of identification and measuring data
about human resource and communicating this information to interested
parties".
According to Stephen Knauf:
"Human resource accounting is measurement and qualification of human
organisation input such as training experience, requesting and commitment".
7. Objectives
Measuring cost related to the human resource of the organization
Enabling management to properly plan and budget for training and other services
for the human resource.
To ensure proper utilization of resources is done or not.
Increasing awareness and value about human resources;
To proper accounting of retiring benefits and other benefits over the service
period;
For efficient and better human resource planning;
For determining actual cost incurred by the organization on human resources;
To determine whether an organization has gained from inputs put on human
resources, training, recruitment, and other facilities.
To aid top management on human resource analysis.
8.
9. Benefits
HR Accounting helps the company ascertain how much Investment it has made
on its Employees and how much return it can expect from this Investment
The Ratio of Human Capital to Non-Human Capital computed as per the HR
Accounting Concept indicates the degree of Labour Intensity of an
Organisation.
HR Accounting provides a basis for planning of physical assets vis-a-vis Human
Resources
HR Accounting provides valuable information to Investors interested in making
Long Term Investments in Service Sector Companies
10.
11. Limitations
1. Variety of Methods Create Confusion -
There are many methods which can be used to calculate the cost incurred on human
resource. This creates misunderstandings, so management should exercise a particular
method to evaluate the human resource cost to avoid any kind of uncertainty.
2. Uncertainty about Continuance of Employees -
Unlike machinery one cannot expect the workforce to stay within the organisation for a
lifetime. Situation may arise that may force the employees to leave the job. Thus, it can
be said that stability of an employee in the organisation is not certain. But this uncertainty
increased the vacancies in the organisation, troubling the estimation of Human Resource
Accounting which further disturb the working of entire organisation.
3. Results in exploitation in organisation -
If the human asset valuation is not done correctly, it may result in exploitation of workers
the evaluation done by the human resource accounting should be useful for the
organisation, but not at the cost of partiality towards the employees.
12. 4. Lack of Perfect Knowledge about Future Receiving of HR -
Future is unpredictable and full of uncertainties, nobody is sure whether an investment will
be profitable or not. Thus, sometimes evaluation on imaginary basis creates a great
problem for HRA system. Therefore, one can say that there is lack of perfect knowledge
regarding future earning of any organisation.
5. Trade Union Resistance -
Estimating the value of human resources may give rise to industrial conflict and residence
by the union leaders. The reason for this opposition can be the blaseness on the part of
management while estimating the value of the human assets. Thus, before introducing
Human Resource Accounting in an organisation all the employees are leader must be made
aware about the importance of HRA and how it can be beneficial for them.
6. Expensive -
While introducing HRA in an organisation the first thing which should be kept in mind that
it should be cost-effective. Thus, the expenditure made on the system should be made
sensibly otherwise it can incur additional cost to the organisation. If its adoption is
affecting the profit of the organisation then the system is useless.
13. Evolution
The development of HRA as a systematic and detailed academic activity according to Eric
G. Flamholtz began in sixties. He divides the development into five stages. These are as
follows :
1. First Stage (1960-66) - This mark the beginning of academic interest in the area of
HRA. However, the focus was preliminary on deriving HRA concept from other studies
like the economic theory of capital, psychological theories of leadership effectiveness,
the emerging concept of human resource as different from personal or human relation
as well as the measurement of corporate goodwill.
2. Second Stage (1966-71) - The focus there was more on developing and validating
different models for human resource accounting. These models covered both cost and
the monetary and non monetary value of human resource. The aim was to develop
some tools that would help the organisation in assessing and managing their human
resource/assets in a more realistic manner. One of the earliest studies here was that of
Roger Hermanson, who as part of his Ph.D. studies the problem of measuring the
value of human assets as an element of goodwill. Inspired by his work, a number of
research projects were undertaken by the researchers to develop the concept and
methods of accounting for human resource.
14. 3. Third Stage (1971-76) - This period was marked by a widespread interest in the field
of Human Resource Accounting leading to a rapid growth of research in the area. The
focus in most cases was on the issue of application of HRA in business organisation.
R.G. Barry experiments contributed substantially during this stage.
4. Fourth Stage (1976-80) - This was a period of decline in the area of HRA preliminary
because of complex issues that needed to be explored required much deeper
empirical research than was needed for the earlier simple models. The organisation,
however where not prepared to sponsor such research. They found the idea of HRA
interesting but did not find much used in pumping in large sums for investing a lot of
time and energy in supporting the research.
5. Fifth Stage (1980 Onwards) - There was a sudden renewal of interest in field of
Human Resource Accounting partly because most of the developed economies had
shifted from manufacturing to service economies and realised the criticality of human
asset for their organisation. Since, the survival growth and profit of the organisation
were perceived to be dependent more on the intellectual assets of the companies
then on the physical assets, the need was felt to have more accurate measure for HR
costs, investment and value.