Human Resources Accounting: Issues, Benefits and Challenges

Osemeke Monday

doi:10.11648/j.ijefm.20170503.11

Abstract

The focus of this paper is on Human Resources Accounting which has not been properly integrated into the financial statement of various organizations and being regarded as assets. The main purpose of this study is to examine the issues involved in valuing human resource /people working in organizations, which has been regarded as the most valuable assets in business organizations, the benefits of attaching values and the challenges and obstacles of implementing the Human Resource accounting disclosures of such values in the firm’s statement of financial position. In the pursuit of the focus of this study the paper adopts exploratory and content analysis methods of secondary data. The paper reveals that the exponent of human resources valuation models in most cases have not dealt with the mode of recording and disclosure of the accounting information relating to human resources in the books of account or financial statements of the organization. In most cases, the human resource accounting information is given in the form of supplementary information attached to the financial statements. This is of great concern to accounting professionals and practitioners. The paper concludes that considerable research done is due to the increasing importance of human capital in the economy to develop the concepts and methods of valuing human resource that has been recognized as human resources accounting (HRA), and that there is a great need for evolving a system of accounting for human resource that is acceptable to professional accountants, mangers and other decision makers – investors, creditors and other stakeholders.

Highlights

The global economy has been shifting from an industrial economy to an information-based economy as a result of the Internet and other new technologies
The considerable research done is due to the increasing importance of human capital in the economy to develop the concepts and methods of valuing human resource that has been recognized as human resources accounting (HRA) (Flamholtz, 1987)
The exponent of human resources valuation models in most cases have not dealt with the mode of recording and disclosure of the accounting information relating to human resources in the books of account or financial statements of the organization

Summary

Introduction

The global economy has been shifting from an industrial economy to an information-based economy as a result of the Internet and other new technologies. Doing so would represent arguably the most monumental finding in the history of financial accounting, but until a reliable measure to report human capital is established, the Financial Accounting Standards Board cannot issue mandate that companies should report that valuable information. There have been controversial issues of human capital reporting on whether its value is relevant to be Osemeke Monday: Human Resources Accounting: Issues, Benefits and Challenges considered as an asset, even though its association with company’s expected future benefits is not certain Some group considered it as what people owned from learning, experience and skill while another group delineated it as human capability that is directly linked to the work of (Maani & Jeradat, 2010, cited in Micah et al, 2012). The purpose of this study is to examine the issues involved in valuing human resource /people working in organizations, which has been regarded as the most valuable assets in business organizations, the benefits of attaching values and the challenges and obstacles of implementing the Human Resource accounting disclosures of such values in the firm’s statement of financial position

Concepts of HRA

Issues in Human Resource Accounting

Benefits of Human Resource Accounting

Conclusion and Recommendations