Human Resource Accounting
The Non accounting of human resources and the change occurring therein, of an organization may provide a poor picture of the profits and profitability of the organization.
“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.
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 is the process of identifying and measuring data about human resources and communicating this information to interested parties.” In simple terms, it is an extension of the accounting principles of matching costs and revenues and of organizing data to communicate relevant information in financial terms.
Historical Score Card of Human Resource Accounting:
The concept of considering the human beings as an asset is an old one. The importance which Emperor Akbar gave to the nine jewels (courtiers) is a strong evidence for the same. The history of our freedom movement will not be complete without mentioning the names of distinguished freedom fighters such as Shri Motilal Nehru, Mahatma Gandhi, Sardar Vallabh Bhai Patel and several others but no effort was made to assign any monetary value to such individuals in the Balance Sheet of the Nation.
Objectives of Hunan Resources Accounting
• Improve management by analyzing investment in HR
• Consider people as its asset
• Attract and retain qualified people
• Profile the organization in financial terms.
There are many limitations which make the management reluctant to introduce HRA. Some of the attributes are:
• There is no proper clear-cut and specific procedure or guidelines for finding cost and value of human resources of an organization. The systems which are being adopted have certain drawbacks.
• The period of existence of human resource is uncertain and hence valuing them under uncertainty in future seems to be unrealistic.
• There is a fear that HRA may dehumanize and manipulate employees.
• The much needed empirical evidence is yet to be found to support the hypothesis that HRA as a tool of the management facilitates better and effective management of human resources.
• In what form and manner, their value to be included in the financial statement is the question yet to be classified on which there is no consensus in the accounting profession.
• As human resources are not capable of being owned, retained and utilized, unlike the physical assets, there is problem for the management to treat them as assets in the strict sense.
Human Resource Accounting Disclosures:
Public Sector Enterprises
1. Bharat Heavy Electricals Limited (BHEL)
2. Steel Authority of India Limited (SAIL)
3. Cement Corporation of India Limited (CCI)
4. Oil and Natural Gas Commission (ONGC)
5. Electronics India Limited
6. Engineers India Limited
7. Hindustan Shipyard
8. National Thermal Power Corporation Limited (NTPC)
Private Sector Enterprises
By Priti Shah