Human Resource Accounting : Indian Scenario

Abstract

It is a fact that human resources are no less important than other resources. The recognition, however, of the importance of people in organizations as productive resources by the accountants is a recent origin. In the management terminology, this is termed as Human Resource Accounting (HRA). In the simplest form, involves the identification of the costs of recruitment, training and maintenance of an entity's human assets. According to American Accounting Association, HRA is a process of identifying and measuring data about human resources and communicating this information to interested parties. Characteristics like personality, self-control, devotion, quality, skills, talents, loyalty and initiatives differentiate the Human Resource from the physical resources. In a nutshell, involves (a) measurement and valuation of human resources and (b) communicating the information so generated for internal and external decision-makers. In 1995-96, companies like Infosys went out to value its human resource which was Rs. 184 crores, much more than the value of its physical assets of Rs. 84 crores. The valuation of human resources has received widespread recognition. In course of time, various accounting models have been developed to evaluate human resources of an organization. Lev and Schwartz Model is widely used by many Indian firms. To make valuation of human resource objective and comparable, there must be a universally acceptable method of valuation.