Human Resource Accounting and Social Accounting Presentation - Unitedworld School of Business

7/28/2019 Human Resource Accounting and Social Accounting Presentation - Unitedworld School of Business

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Meaning of human resource accounting

Human Resources accounting, also known asHuman Asset Accounting, involved identifying,measuring, capturing, tracking and analyzing thepotential of the human resources of a company and

communicating the resultant information to thestakeholders of the company.It was a method by which a cost was assigned to every employee when recruited, and the value that the

employee would generate in the future.Human Resource accounting reflected the potential of the human resources of an organization in monetary terms, in its financial statements.


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AAA Definition: The process of identifying and measuring data abouthuman resources and communicating this information tothe interested parties

Stephen Knauf (1983):

The measurement and quantification of humanorganizational inputs such as recruiting, training,experience and commitment

Eric Flamholtz Accounting for people as organizational resources. It is

the measurement of the cost and value of people for theorganization


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Why HRA?

It furnishes cost/value information for makingmanagement decisions about acquiring, allocating,developing, and maintaining human resources inorder to attain cost-effectiveness;

It allows management personnel to monitor effectively the use of human resources;It provides a sound and effective basis of human assetcontrol, that is, whether the asset is appreciated,

depleted or conserved;It helps in the development of management principlesby classifying the financial consequences of variouspractices.


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Need for hra

HR Accounting is very much needed to provideeffective & efficient management within theorganization.

If there is any change in the structure of manpower, itis HRA which provides information on it to themanagement.

HRA provides qualitative information & also assess thecost incurred in personnel.


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It gives a platform to the management by providingfactors for better decision-making for futureinvestment.

The return on Investment on human capital is bestevaluated through HRA.

HRA communicates to the organization & public aboutthe worth of human resources & also its properallocation within the organization.

HR helps the management in developing principles by classifying the financial consequences of the variouspractices.


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Valuation Approaches of Human Resource

Measurement is arbitrary and there are mainly 2approaches;Cost based approachesPresent Value of Future Earning

Cost Based Approaches

1. Historical Cost Approach2. Replacement Cost Approach3. Opportunity Cost Approach


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Historical Cost Approach

The cost of recruitment, selection, development are allcapitalized and amortized over the useful life time of the employee. This amortization may be dealt

according to the situation.Benefits: Easy to operate, Conforms with the matchingprinciple, Similar to the treatment of other fixed assetsShortcomings: Estimation of the useful life time may not be easy, The value of humans are generally increasing over time - but this method gives adeclining picture, This method doesnt actually measure the value but undermines it


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Replacement Cost Approach

The cost to replace the existing human resources areestimated. All costs incurred to attain the current levelof competence of an existing employee. Created fromscratch

Benefits: Is present/ future orientedDisadvantage: Not always possible to obtain such ameasure (identical replacement), It is hencesubjective


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Present Value of Future Earnings

Lev and Schwartz (1971) proposed an economic valuationof employees based on the present value of future earnings,adjusted for the probability of employees death/separathion/retirement.This method helps in determining what an employees

future contribution is worth today.

According to this model, the value of human capitalembodied in a person who is yyears old, is the present valueof his/her future earnings from employment and can becalculated by using the following formula:E(Vy) = Py(t+1) I(T)/(I+R)t-y T=Y Y

where E (Vy) = expected value of a yyear old persons humancapital T = the persons retirement age Py (t) = probability of the person leaving the organization I(t) = expected earnings of the person in period I r = discount rate


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Limitations

The measure is an objective one because it uses widely based statistics such as census income returnand mortality tables.The measure assigns more weight to averages than tothe value of any specific group or individual.


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Investment pattern

The human resource investment usually consists of thefollowing items:-1) Expenditure on advertisement for recruitment2) Cost of selection3) Training cost4) On the job training cost5) Subsistence allowance6) Contribution to provident Fund7) Educational tour expenses8) Medical expenses9) Ex-gratia payments10) Employees Welfare Fund All these items influence directly or indirectly the human

resources and the productivity of the organization.


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Hra in indiaThough Human Resources Accounting was introduced way

back in the 1980s, it started gaining popularity in India after it was adopted and popularized by NLC. Even though thesituation prevails, yet, a growing trend towards themeasurement and reporting of human resources particularly in public sector is noticeable during the past few years. BHEL, Cement Corporation of India, ONGC,Engineers India Ltd., National Thermal Corporation,Minerals and Metals Trading Corporation, Madras Refineries,Oil India Ltd., Associated Cement Companies, SPIC,Metallurgical and Engineering consultants India Limited,

Cochin Refineries Ltd. Etc. are some of the organizations, which have started disclosing some valuable informationregarding human resources in their financial statements. It isneedless to mention here that, the importance of humanresources in business organization as productive resources

was by and large ignored by the accountants until twodecades ago.


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Social Accounting

social accounting may be defined as identification andrecording of business activities and socialresponsibilities.social responsibilities concept is one of the importantconcept of management.it is the duty of enterprise to do some social activities

to completing their social responsibilities.social accounting is very important tool to measuresthe performance of any company in a view of socialresponsibilities.


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company has to make the social responsibilitiesincome statement and balance sheet. But it is notcompulsory to make these statement.France , UK and USA are the top countries wheresocial responsibility statements are made with otherfinancial statements . In India social accounting is notso popular but some India companies are now focusingon social responsibility and also started to make socialreport for calculating to total cost and benefits forperforming social responsibility .


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objectives of social accounting

Main objectives of social accounting are to help society by providing different facilities by enterprise and to recordthem. We can write them in following points.

1. Effective utilization of natural resources

Main objectives of making social accounting is todetermine whether company is properly utilize theirnatural resources or not .


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2. Help to employees

Company can help employees by providing the facility of education to children of employees, providingtransport free of cost and also providing good workingenvironment conditions .

3.Help to society Because companies' factories spread the pollution innatural society which is very harmful for society . So ,enterprise can help to society by planting the trees ,establishing new parks near factory area. and alsoopening new hospitals .


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4. Help to customersIn social accounting this the part of benefits given by company to society , if company provides goods tocustomers at lower rate and with high quality .

5. Help to investors Company can help to investors by providingtransparent accounting information to investors .Because of many objectives are related to safeguardingof natural resources so this accounting is also known

as Social and Environmental Accounting, CorporateSocial Reporting, Corporate Social Responsibility Reporting, Non-Financial Reporting, Sustainability Accounting


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Aditya Birla social projects

vision "To actively contribute to the social and economic

development of the communities in which weoperate. In so doing, build a better, sustainable way of life for the weaker sections of society andraise the country's human development index."


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EducationBalwadis

(pre-school)

AdulteducationNon-formal

education

ContinuingeducationScholarships

for girls, meritand technicaleducation


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Farmersdevelopment

Self-help groupsSGSY - dairy,

readymadegarments, juteproject, basketmaking, aggarbatimaking, bee keeping,

durrie making.Check damIrrigationLand developmentSoil and water

conservationPasture

developmentSocial forestry/

plantation activities/nursery

HorticultureFarmer trainin


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Health andfamily welfare

Mobile clinics -doctors visit once a week

Medical camps -general and issue-based

Health trainingand awarenessSanitation - toilets,

training, smokelesschullahs, biogas

Safe drinking waterMother and child

healthReproductive

health Awareness building


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Infrastructure

development

RoadsDamsCommunity

centersHouses CulvertsElectricity Health centers

Water channels

Schools


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Social causes

Widow / dowry-less mass marriages

Womenempowerment

Awareness drives

on knowledge,attitude andpractices


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Social responsibility income statement

No. particular Amount(credit)

1.Opening of park expenses

- - - - - - - -

2.health free services

- - - - - - - -

3.plantation

- - - - - - - -

4.water free facility

- - - - - - -

5.employees

- - - - - - - -

Net (credit)balance - - - - - - - - -


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No. particular Amount(debit)

1. Natural losses due to pollution - - - - - - -

2. Health defects - - - - - - -

3. other losses due to co. operations -- - - - - -

Net(debit )balance - - - - -- -

Net benefits given by co. to society(credit-debit)

- - - - - - -

C O i


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Campus Overview

907/A Uvarshad,GandhinagarHighway, Ahmedabad 382422.

Ahmedabad Kolkata

Infinity Benchmark, 10 th Floor, Plot G1,Block EP & GP,Sector V, Salt-Lake,Kolkata 700091.

Mumbai

Goldline Business CentreLinkway Estate,Next to Chincholi FireBrigade, Malad (West),Mumbai 400 064.


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Thank You

Human Resource Accounting and Social Accounting Presentation - Unitedworld School of Business

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