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 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 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.
This document discusses human capital perspective and valuation approaches. It defines human capital as the knowledge and skills individuals acquire. There are three types of capital: customer, structural, and human. Human capital refers to employee expertise. Valuing human capital is important for management. Approaches include cost and economic models like present value, reward valuation, net benefit, and certainty equivalent net benefit models. These approaches discount future earnings to calculate current value but have limitations. Companies like Infosys use models like Lev and Schwartz to value human resources in financial reports. In conclusion, accurately valuing human capital is beneficial for management decisions.
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.
HR accounting and inventory seminar- by (deepak k ajayan- mhrm 13- DiST)deepakmhrm
Human resource accounting aims to measure the value and costs of an organization's employees. It provides important information for management decision making. There are several methods for calculating the value of human resources, such as historical cost, replacement cost, opportunity cost, and capitalizing salary costs. An important related concept is human resource inventory, which catalogs each employee's skills, experience, potential, and suitability for different roles to aid in succession planning and internal hiring. Maintaining management inventory cards, position replacement forms, and management manpower replacement charts allows organizations to effectively track their human capital resources.
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.
Human resource accounting and their models.pptxBharathKumarK21
Human Resource Accounting is a process that identifies, measures, and reports the value of human resources in an organization. It aims to produce cost and value information of employees, effectively monitor human resource use, and appreciate/depreciate human resources as assets. The main advantages are helping with decision making, identifying workforce strengths/weaknesses, measuring HR policy effectiveness, and judging return on investment in human resources. Common valuation methods include historical cost, replacement cost, present value, and asset multiplier. Limitations include lack of standardization, assumptions that may not hold true, and difficulties estimating employee lifespan and depreciation/appreciation.
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 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.
This document discusses human capital perspective and valuation approaches. It defines human capital as the knowledge and skills individuals acquire. There are three types of capital: customer, structural, and human. Human capital refers to employee expertise. Valuing human capital is important for management. Approaches include cost and economic models like present value, reward valuation, net benefit, and certainty equivalent net benefit models. These approaches discount future earnings to calculate current value but have limitations. Companies like Infosys use models like Lev and Schwartz to value human resources in financial reports. In conclusion, accurately valuing human capital is beneficial for management decisions.
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.
HR accounting and inventory seminar- by (deepak k ajayan- mhrm 13- DiST)deepakmhrm
Human resource accounting aims to measure the value and costs of an organization's employees. It provides important information for management decision making. There are several methods for calculating the value of human resources, such as historical cost, replacement cost, opportunity cost, and capitalizing salary costs. An important related concept is human resource inventory, which catalogs each employee's skills, experience, potential, and suitability for different roles to aid in succession planning and internal hiring. Maintaining management inventory cards, position replacement forms, and management manpower replacement charts allows organizations to effectively track their human capital resources.
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.
Human resource accounting and their models.pptxBharathKumarK21
Human Resource Accounting is a process that identifies, measures, and reports the value of human resources in an organization. It aims to produce cost and value information of employees, effectively monitor human resource use, and appreciate/depreciate human resources as assets. The main advantages are helping with decision making, identifying workforce strengths/weaknesses, measuring HR policy effectiveness, and judging return on investment in human resources. Common valuation methods include historical cost, replacement cost, present value, and asset multiplier. Limitations include lack of standardization, assumptions that may not hold true, and difficulties estimating employee lifespan and depreciation/appreciation.
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.
Human resource accounting (HRA) recognizes human resources as assets that are measured and reported on a company's balance sheet. It involves identifying investments in people, measuring costs and valuing human resources, and communicating this information through financial statements. HRA provides both quantitative and qualitative information to help management make better decisions regarding human capital and its return on investment. There are various methods used to value human resources, such as historical cost, replacement cost, and opportunity cost. While HRA faces challenges in implementation, it aims to improve internal management and motivate employees by valuing their contributions.
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.
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 models aim to measure the costs and value of human resources within an organization. It involves quantifying recruitment, training, and other costs associated with human capital. Valuation methods include historical cost, replacement cost, and opportunity cost approaches. Models like Lev-Schwartz, Flamholtz, and Hermanson's seek to assign monetary values to employee contributions and future earnings in order to assess return on investment in human resources. The goals of human resource accounting are to provide useful information for strategic planning, evaluate resource utilization, and quantify the economic value of human assets.
This document discusses four main methods of human resources accounting: the historical cost method, replacement cost method, opportunity cost method, and economic valuation method. The historical cost method capitalizes recruitment, training, and development costs and treats them as assets that depreciate over an employee's tenure. The replacement cost method values human resources based on the projected costs to replace employees. The opportunity cost method determines value based on what other areas of the company would pay for an employee's services. Finally, the economic valuation method discounts future salary and benefits to calculate the present economic value of an employee.
This document discusses human resource accounting. It defines human resource accounting as tracking the financial, human, and non-financial aspects of an organization's employees. This includes metrics like employee engagement, training effectiveness, turnover, and absenteeism. The primary purpose is to provide an accurate record of employee performance and evaluate training programs. Human resource accounting also involves collecting, analyzing, and reporting data on benefits, compensation, and other HR practices. Key aspects include human resource management, benefits, payroll, compensation, and records management. The objectives are to provide accurate information for decision making regarding personnel, compensation, and other HR matters.
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
HRA is the systematic process of identifying, measuring & communicating data about human resources.
According to Flamhoitz HRA involves measuring the costs incurred by business firms & other organizations to recruit, select, hire, train & develop human assets.
HRA therefore, shows how the organization makes investment in its people & how the value of the people change over time. Value of the employees increases by training (the core HRD activity ) & experience over a time period.
With the help of HRIS (personal profile, career profile, benefits profile ) organizations collect basic information while doing HRA.
Personal profile – name, age, gender, address, phone number, service date.
Career profile – education, training, certificate, license, degrees, skills, hobbies, requisite training etc.
Benefits profile – insurance coverage, disability provisions, pension, profit sharing, vacation, holidays, sick leave etc.
HRIS consists of
Number of employees
Categories
Grades
Total value of HRs
Value per employee
Number of employees acquired during the year
Cost of acquisition
Levels for which they were acquired
HR development
HR maintenance
Cost related to HR maintenance
HR separation
Cost related to HR separation
Detail of benefits provided to the employee
Methods of evaluation can be non-monetary & monetary
Non- monetary measures – It involves the classification of human resources in terms of skills, performance evaluation, potentiality for development & promotion, attitude surveys & subjective values
Skill is coordinated series of actions to attain some goal. Skills are defined widely as overt responses & controlled stimulation.
Overt responses may either be verbal, motor or perceptual.
Verbal responses typically stress on speaking.
Motor responses stress on movements of limbs & body.
Perceptual responses stress on understanding of sensory responses.
Controlled stimulation are energy inputs to the workers which we express in units of frequency, length, time & weight.
Monetary measures are
Capitalization of historical costs method
Replacement cost method
Opportunity cost method
Economic value method
Present value method
Historical cost method was developed by Likert.
It capitalizes all costs of recruitment, hiring, training & other initial costs involved in the development of HRs.
The amount which is capitalized is written off over the period of an employee remains with the organization.
If he leaves before the expected service period, the amount remaining as an asset is written off in the year of leaving.
Replacement cost method measures the cost to replace an organization’s existing human resources.
It indicates what it would cost the concern to recruit, hire, train & develop human resources to match the present level of efficiency.
Under opportunity cost method, the value of HRs is determined on the basis of the value of an individual employee in an alternative use.
If an employee can be hired externally, there is no opportunity cost for him.
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.
The document discusses human resource accounting and provides definitions, methods, and an introduction. It defines human resource accounting as an accounting system that recognizes human resources as an asset and records its value like physical assets. It then describes several methods of valuing human resources, including historical cost, replacement cost, opportunity cost, and capitalizing salary methods.
Human Resource Accounting is a method to measure the value and effectiveness of human resources within an organization. There are two main categories of methods - monetary and non-monetary. Monetary methods assign dollar values to human resources using approaches like historical cost, replacement cost, and economic value. Non-monetary methods use indices and ratings to measure traits, skills, and productivity. Common monetary methods include historical cost, replacement cost, opportunity cost, and economic value. Non-monetary methods include skills inventories, performance evaluations, and attitude measurements. The goal of HRA is to provide useful information for effective human resource management and decision making.
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.
Evaluation and Implementation of HRA in Educational Sector Ruby Research Labs
This document provides an overview of human resource accounting (HRA) and discusses several models for implementing HRA. It begins with definitions of HRA and discusses problems with existing frameworks. Several chapters outline objectives to develop a new HRA model for the education sector, review past literature on HRA models, and describe the proposed research methodology. Methods of HRA covered include human resource cost accounting and models proposed by Lev/Schwartz, Flamholz, Giles/Robinson, Hermanson, Jaggi/Lau, and Morse for valuing human resources. The conclusion states that more research is needed to develop an HRA model tailored for the education context in India.
The document discusses human resource accounting, which aims to identify and report on investments made in an organization's human resources by treating people as assets and measuring their value similarly to physical assets. It provides various definitions of human resource accounting and outlines methods such as historical cost, replacement cost, opportunity cost, and capitalization of salary for measuring the value of human resources.
Human resource accounting provides quantitative information about the value of human assets.Human resource accounting involves the tracking of all costs related to employees in a separate report. These costs include employee compensation, payroll taxes, benefits, training, and recruiting.
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 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
This document provides an overview of human resource accounting. It defines human resource accounting and outlines its historical development from the 1960s to present day. It describes the objectives and uses of HRA, and lists 10 common methods for valuing human resources, such as historical cost, replacement cost, and return on efforts employed. The advantages and limitations of HRA are also discussed. While HRA was introduced in the 1980s, interest has grown in measuring and reporting human resources in public sector organizations in India.
Comparing Stability and Sustainability in Agile SystemsRob Healy
Copy of the presentation given at XP2024 based on a research paper.
In this paper we explain wat overwork is and the physical and mental health risks associated with it.
We then explore how overwork relates to system stability and inventory.
Finally there is a call to action for Team Leads / Scrum Masters / Managers to measure and monitor excess work for individual teams.
Colby Hobson: Residential Construction Leader Building a Solid Reputation Thr...dsnow9802
Colby Hobson stands out as a dynamic leader in the residential construction industry. With a solid reputation built on his exceptional communication and presentation skills, Colby has proven himself to be an excellent team player, fostering a collaborative and efficient work environment.
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.
Human resource accounting (HRA) recognizes human resources as assets that are measured and reported on a company's balance sheet. It involves identifying investments in people, measuring costs and valuing human resources, and communicating this information through financial statements. HRA provides both quantitative and qualitative information to help management make better decisions regarding human capital and its return on investment. There are various methods used to value human resources, such as historical cost, replacement cost, and opportunity cost. While HRA faces challenges in implementation, it aims to improve internal management and motivate employees by valuing their contributions.
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.
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 models aim to measure the costs and value of human resources within an organization. It involves quantifying recruitment, training, and other costs associated with human capital. Valuation methods include historical cost, replacement cost, and opportunity cost approaches. Models like Lev-Schwartz, Flamholtz, and Hermanson's seek to assign monetary values to employee contributions and future earnings in order to assess return on investment in human resources. The goals of human resource accounting are to provide useful information for strategic planning, evaluate resource utilization, and quantify the economic value of human assets.
This document discusses four main methods of human resources accounting: the historical cost method, replacement cost method, opportunity cost method, and economic valuation method. The historical cost method capitalizes recruitment, training, and development costs and treats them as assets that depreciate over an employee's tenure. The replacement cost method values human resources based on the projected costs to replace employees. The opportunity cost method determines value based on what other areas of the company would pay for an employee's services. Finally, the economic valuation method discounts future salary and benefits to calculate the present economic value of an employee.
This document discusses human resource accounting. It defines human resource accounting as tracking the financial, human, and non-financial aspects of an organization's employees. This includes metrics like employee engagement, training effectiveness, turnover, and absenteeism. The primary purpose is to provide an accurate record of employee performance and evaluate training programs. Human resource accounting also involves collecting, analyzing, and reporting data on benefits, compensation, and other HR practices. Key aspects include human resource management, benefits, payroll, compensation, and records management. The objectives are to provide accurate information for decision making regarding personnel, compensation, and other HR matters.
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
HRA is the systematic process of identifying, measuring & communicating data about human resources.
According to Flamhoitz HRA involves measuring the costs incurred by business firms & other organizations to recruit, select, hire, train & develop human assets.
HRA therefore, shows how the organization makes investment in its people & how the value of the people change over time. Value of the employees increases by training (the core HRD activity ) & experience over a time period.
With the help of HRIS (personal profile, career profile, benefits profile ) organizations collect basic information while doing HRA.
Personal profile – name, age, gender, address, phone number, service date.
Career profile – education, training, certificate, license, degrees, skills, hobbies, requisite training etc.
Benefits profile – insurance coverage, disability provisions, pension, profit sharing, vacation, holidays, sick leave etc.
HRIS consists of
Number of employees
Categories
Grades
Total value of HRs
Value per employee
Number of employees acquired during the year
Cost of acquisition
Levels for which they were acquired
HR development
HR maintenance
Cost related to HR maintenance
HR separation
Cost related to HR separation
Detail of benefits provided to the employee
Methods of evaluation can be non-monetary & monetary
Non- monetary measures – It involves the classification of human resources in terms of skills, performance evaluation, potentiality for development & promotion, attitude surveys & subjective values
Skill is coordinated series of actions to attain some goal. Skills are defined widely as overt responses & controlled stimulation.
Overt responses may either be verbal, motor or perceptual.
Verbal responses typically stress on speaking.
Motor responses stress on movements of limbs & body.
Perceptual responses stress on understanding of sensory responses.
Controlled stimulation are energy inputs to the workers which we express in units of frequency, length, time & weight.
Monetary measures are
Capitalization of historical costs method
Replacement cost method
Opportunity cost method
Economic value method
Present value method
Historical cost method was developed by Likert.
It capitalizes all costs of recruitment, hiring, training & other initial costs involved in the development of HRs.
The amount which is capitalized is written off over the period of an employee remains with the organization.
If he leaves before the expected service period, the amount remaining as an asset is written off in the year of leaving.
Replacement cost method measures the cost to replace an organization’s existing human resources.
It indicates what it would cost the concern to recruit, hire, train & develop human resources to match the present level of efficiency.
Under opportunity cost method, the value of HRs is determined on the basis of the value of an individual employee in an alternative use.
If an employee can be hired externally, there is no opportunity cost for him.
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.
The document discusses human resource accounting and provides definitions, methods, and an introduction. It defines human resource accounting as an accounting system that recognizes human resources as an asset and records its value like physical assets. It then describes several methods of valuing human resources, including historical cost, replacement cost, opportunity cost, and capitalizing salary methods.
Human Resource Accounting is a method to measure the value and effectiveness of human resources within an organization. There are two main categories of methods - monetary and non-monetary. Monetary methods assign dollar values to human resources using approaches like historical cost, replacement cost, and economic value. Non-monetary methods use indices and ratings to measure traits, skills, and productivity. Common monetary methods include historical cost, replacement cost, opportunity cost, and economic value. Non-monetary methods include skills inventories, performance evaluations, and attitude measurements. The goal of HRA is to provide useful information for effective human resource management and decision making.
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.
Evaluation and Implementation of HRA in Educational Sector Ruby Research Labs
This document provides an overview of human resource accounting (HRA) and discusses several models for implementing HRA. It begins with definitions of HRA and discusses problems with existing frameworks. Several chapters outline objectives to develop a new HRA model for the education sector, review past literature on HRA models, and describe the proposed research methodology. Methods of HRA covered include human resource cost accounting and models proposed by Lev/Schwartz, Flamholz, Giles/Robinson, Hermanson, Jaggi/Lau, and Morse for valuing human resources. The conclusion states that more research is needed to develop an HRA model tailored for the education context in India.
The document discusses human resource accounting, which aims to identify and report on investments made in an organization's human resources by treating people as assets and measuring their value similarly to physical assets. It provides various definitions of human resource accounting and outlines methods such as historical cost, replacement cost, opportunity cost, and capitalization of salary for measuring the value of human resources.
Human resource accounting provides quantitative information about the value of human assets.Human resource accounting involves the tracking of all costs related to employees in a separate report. These costs include employee compensation, payroll taxes, benefits, training, and recruiting.
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 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
This document provides an overview of human resource accounting. It defines human resource accounting and outlines its historical development from the 1960s to present day. It describes the objectives and uses of HRA, and lists 10 common methods for valuing human resources, such as historical cost, replacement cost, and return on efforts employed. The advantages and limitations of HRA are also discussed. While HRA was introduced in the 1980s, interest has grown in measuring and reporting human resources in public sector organizations in India.
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2.
Introduction
Objectives of HRA
Importance of HRA
Limitations
Cost of Human Resources
Measurements in HRA
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
13.
This approach was developed by William C. Pyle nd R.G.
Barry corporation, a leisure footwear manufacturer based on
Columbus, Ohio (USA) in 1967
In this approach, actual cost incurred on recruiting, hiring,
training and development the human resources of the
organisation are capitalised and amortised over the expected
useful life of the human resources.
Thus a proper recording of the expenditure made on hiring,
selecting, training and developing the employees is
maintained and a proportion of it is written off to the income
of the next few years during which human resources will
provide service.
Historical Cost Approach
14.
This approach was first suggested by Rensis Likert, and was
developed by Eric G. Flamholtz
Human resources of an organisation are to be valued on the
assumption that a new similar organisation has to be created
from scratch and what would be the cost to the firm if the
existing resources were required to be replaced with other
persons of equivalent talents and experience.
It takes into consideration all cost involved in recruiting,
hiring, training and developing the replacement to the present
level of proficiency and familiarity with the organisation.
This approach is more realistic as it incorporates the current
value of company’s human resources in its financial statements
prepared at the end of the year.
Replacement Cost Approach
15.
This method was first advocated by Hc Kiman and
Jones
Opportunity cost is the value of an asset when there is
an alternative use of it. There is no opportunity cost for
those employees that are not scarce and also those at
the top will not be available for auction. As such, only
scarce people should comprise the value of human
resources.
This method can work for some of the people at shop
floor and middle order management.
Opportunity Cost
16.
Lev & Schwartz advocated the estimation of future
earnings during the remaining service life of the
employee and then arriving at the present value by
discounting the estimated earnings at the cost of
capital. The assumptions in this method are realistic
and scientific.
The method has practical applicability when the
availability of quantifiable and analyzable data is
concerned.
The Lev and Schwartz Model
17.
According to this model, the value of human resources
is ascertained in the following ways:
All employees are classified into specific groups
according to age, experience, and skill.
Average annual earnings are determined for various
ranges of age.
The total earnings each group will get up to
retirement age are calculated.
The total earnings calculated as above are discounted
at the rate of the cost of capital.
The value thus arrived at will be the value of human
resources/assets.
18.
This is an improvement on the present value of the
future earnings model since it considers the possibility
or probability of an employee’s movement from one role
to another in his career and of leaving the firm earlier,
that is, death or retirement.
The model suggests a five-step approach for assessing
the value of an individual to the organization:
The Eric Flamholtz Model
19.
Forecasting the period will remain in the
organization, i.e., his expected service life;
Identifying the services states, i.e., the roles that they
might occupy, including, of course, the time at which
he will leave the organization;
Estimating the value derived by the organization
when a person occupies a particular position for a
specified period;
Estimating the probability of occupying each
possible mutually exclusive state at specified future
times; and
Discounting the value at a predetermined rate to get
the present value of human resources.
20.
Under this model, the value of human resources is
equivalent to the present value of the enterprise’s net
benefits from its employees’ service. The following
steps are involved in this approach:
The gross value of the services to be rendered by the
employees in their individual and collective capacity.
The value of direct and indirect future payments to
the employees is determined.
The excess of the value of future human
resources over the value of future payments is
ascertained. This represents the net benefit to the
enterprise because of human resources.
Morse Model
21.
Rensis Likert, in the 1960s, was the first to research HRA(Human
Resource Accounting) and emphasized the importance of strong
pressures on HR’s qualitative variables and its benefits in the
long run.
The Likert Model is a non-monetary value-based model.
According to Likert’s model, the human variable can be divided
into three categories:
Causal variables;
Intervening variables; and
End-result variables.
The interaction between the causal and intervening
variables affects the end-result variables through job satisfaction,
costs, productivity, and earnings.
Likert Model
22.
Pekin Ogan (1976) was the pioneer of the Net benefit model.
This is an extension of the “net benefit approach,” as suggested
by Morse.
According to this approach, the certainty with which the net
benefits in the future will accrue should also be considered
while determining the value of human resources.
The approach requires the determination of the following:
Net benefit from each employee.
Certain factors at which the benefits will be available.
The net benefits from all employees multiplied by their
certainty factor will give certainty-equivalent net benefits.
Ogan’s Model
23.
The traditional accounting practices ignored the value of human
factors in the organization and preferred treating them as expense
and expendable. This fundamentally lopsided attitude towards
human resources decisively goes against the employees’ interests.
For instance, the cost of training incurred to update the skills and
knowledge of the employees were treated only as an expense and not
as an investment.
Although human resource accounting is still in its infancy as far as its
development is concerned, a few approaches are available to study
human resource accounting.
However, none of these approaches has found universal acceptance
because they have inbuilt contradictions, incompleteness, or inability.
Thus far, these approaches have failed to fulfill the basic requirements
of traditional accounting concepts and practices like the double-entry
concept.
It is still challenging to determine the value of the organization’s
human resources through different methods, and accounting
techniques have already been opposed to human resource
accounting.
Conclusion