Abstract
Human capital information which is vital for effective management of resources is usually only accessible internally within an organization. However, information regarding human capital or human resource investments and the return on these investments are currently not presented in the annual reports systematically and consistently. This paper examines the extent of the disclosure of human capital in the annual reports of Malaysian top companies based on the concept of Human Resource Costing and Accounting (HRCA) and other relevant human capital elements or measures. A content analysis using word count was conducted to determine the extent of human capital disclosures. The findings reveal that the concept of HRCA is still distant to human resource managers in Malaysia. The human capital items which are most commonly disclosed are information on training, human resource development, employee skill, knowledge and competence. Return on human resource investment is not reported in the annual reports.
Highlights
There is no accounting standard on disclosure of human capital-related information
According to Flamholtz (1985), an erroneous belief suggesting that human resource accounting” (HRA) was concerned only with treating people as financial objects, preparing financial statements that included human resources was undoubtedly a part of HRA, it was dramatic and innovative, putting people on the balance sheet became the dominant image of HRA for many people
As HR management is an important strategy to companies it is expected that companies should disclose HR-related items in their annual reports even though these are not required by the Companies Act or the accounting standards
Summary
There is no accounting standard on disclosure of human capital-related information. Some companies do not provide any information on human capital in their annual reports since they are not required to do so. Companies have started disclosing intellectual capital, the intangible assets of skill and knowledge in their financial reports (Stewart, 1994). This paper explores and examines the current scenario of Malaysian top companies on human capital reporting It seeks to find out how these companies present their HR investment and their measures on these returns, if any. It looks at the extent of disclosure of human capital information or items in the annual reports of these companies
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