HUMAN RESOURCE ACCOUNTING

HUMAN RESOURCE ACCOUNTING Accounting is concerned with recording, classification, summarization of transactions which are financial in nature and finding out results thereof. process of accounting RECORDINGCLASSIFICATIONSUMMARIZATIONPREPRATION OF FINANCIAL STATEMENTS

ACCOUNTINGHuman resources are the people and their characteristics at work either at national level or organizational level.Knowledge, skills, attitude or other attributes.

HUMAN RESOURCEHuman resource accounting is accounting for people as an organizational resource. It involves measuring the cost incurred by business firms and other organizations to recruit, select, hire, train, and develop human assets. It also involves measuring the economic value of people to the organization.

Human resource accountingTo provide cost value data for managerial decisions regarding acquiring, developing, allocating and maintaining human resource so as to attain cost-effective organizational objectivesTo provide information to monitor the effectiveness of human resource utilization.To provide information for determining the status of human asset whether it is conserved properly; it is appreciating or depleting.

OBJECTIVESHISTORICAL COST: based on actual cost incurred on human resource. Such a cost may be of two type acquisition cost and learning cost ACQUISITION COST: expenses incurred on recruitment, selection and placement. LEARNING COST: expenses incurred on training and development. METHODS OF VALUATION OF HUMAN CAPITALREPLACEMENT COST: takes into account the notional cost that may be required to acquire a new employee to replace the present one. Replacement cost is generally much higher than the historical cost. For example: Friedman has estimated that the replacement cost of an executive in middle management level is about 1.5 to 2 times the current salary paid in that positionSTANDARD COST: in this method, employees of an organization are categorised into different groups based on their positions. Standard cost is fixed for each category of employees and their value is calculated.

PRESENT VALUE OF FUTURE EARNINGS: in this method, the future earnings of various groups of employees are estimated upto the age of their retirement and are discounted at a predetermined rate to obtain the present value of such earnings. This method does not considered the employees contribution to achieve the organizational effectiveness.EXPECTED REALISABLE VALUE: this method is based on the assumption that there is no direct relationship between cost incurred on an individual and his value to the organization at a particular point of time.

An individuals value can be defined as a present worth of the set of future services that he is expected to provide during the period he remains in the organization.

ContinuedHelps in providing valuable information to the management for effective planning and managing human resource.Helps in the measurement of standard cost of recruiting, selecting and developing people and organization can select a person with highest expected realisable value.ADVANTAGES OF HRAHRA can change the attitude of manager completely. Thereby they would try to maximize the expected value of human resource and effective use of human resources in the organization. ContinuedThere is no well set standard accounting practice for measuring the value of human resources.The valuation of human capital is based on the assumption that the employees may remain the organization for certain specific period this assumption may hold true in todays context because of increased human resource mobility.PROBLEMS IN HRAThere is a possibility that trade unions may oppose the use of human resource accounting. They may want parity of wages/salaries and value of employee.ContinuedBHEL LTDINFOSYS LTDCADENCE SYSTEM LTDHCLNIITRELIANCE HTML

Various co. uses HRABHEL CO. followed the discount rate at 12% considering the weighted average cost of capital. It categorise employees according to their age, grade and category for the purpose of valuation and reporting information related to human resource accounting. It also disclosed the ratios like HR/TOTAL RESOURCES, HR/FIXED ASSET, TURNOVER/HUMAN RESOURCE VALUE, VALUE ADDED/TOTAL RESOURCE, PROFIT BEFORE TAX/HR VALUE. BHEL CO.All the employees of infosys ltd were devided into five groups, based on their average age. Each group average compensation was calculated.Infosys also calculated the compensation of each employee at retirement by using an average rate of increment.Increment are based on industry standards and the employees performance and productivity. INFOSYS LTD.Finally the total compensation at each group was calculated. The value was discounted at the rate persent per annum which was the cost of capital at infosys to arrive at total human resource of infosys.Continued..During the past decade, there has been a growing interest in the idea of accounting for people as organizational resources. This interest has led to an emerging interdisciplinary field of research known as "Human Resource Accounting." This paper reviews the current body of theory and research in human resource accounting.Eric Flamholtz

HUMAN RESOURCE ACCOUNTING: A REVIEW OF THEORY AND RESEARCH.Human resource costing and accounting (HRCA) is a complex and poorly understood process of accounting. The behavioural impact of HRCA, the many diverging internal forces of an organization, the increasing need of information from the capital market and action from organizations, such as the organization for the economic cooperation and development (OECD) and European commission (EC), are all part of this accounting change process. With Sweden as a starting point, forces stimulating and inhibiting the development of HRCA are discussed. The main conclusion is that the actual state of things (reality) provides more research opportunities today than in the 1970s. But where are the researchers?Current development in human resource costing and accounting: Reality present, researchers absent?The purpose of this paper is to provide an overview and history of human resource accounting (HRA) with the objective of promoting both continued academic research and organizational applications. The history of HRA illustrates how academic research can generate improvement in management systems. The paper defines HRA and suggests implications of measuring human capital for financial reporting and managerial uses. Recent Swedishbased HRA applications with respect to measuring human assets and intellectual capital, including the Skandia Navigator, illustrate how intellectual history and developments in business schools can influence business history.Human resource accounting: a historical perspective and future implications