Human Resource Accounting is defined as identifying and measuring data about human resources and communicating this information. It developed in stages from 1960-1980, with renewed interest after 1980. The purposes of HRA include providing cost/value information about acquiring, developing, allocating and maintaining human resources to effectively monitor their use. HRA also aims to determine if human assets are appreciating or depreciating over time.
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Human Resource Accounting is defined as identifying and measuring data about human resources and communicating this information. It developed in stages from 1960-1980, with renewed interest after 1980. The purposes of HRA include providing cost/value information about acquiring, developing, allocating and maintaining human resources to effectively monitor their use. HRA also aims to determine if human assets are appreciating or depreciating over time.
Human Resource Accounting is defined as identifying and measuring data about human resources and communicating this information. It developed in stages from 1960-1980, with renewed interest after 1980. The purposes of HRA include providing cost/value information about acquiring, developing, allocating and maintaining human resources to effectively monitor their use. HRA also aims to determine if human assets are appreciating or depreciating over time.
Copyright:
Attribution Non-Commercial (BY-NC)
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Download as PPTX, PDF, TXT or read online from Scribd
Human Resource Accounting is defined as identifying and measuring data about human resources and communicating this information. It developed in stages from 1960-1980, with renewed interest after 1980. The purposes of HRA include providing cost/value information about acquiring, developing, allocating and maintaining human resources to effectively monitor their use. HRA also aims to determine if human assets are appreciating or depreciating over time.
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Human Resource Accounting is, the process of identifying and measuring data about human resource and communicating
this information to interested parties. -American Accounting Association Committee
STAGE II(196671)
STAGE III(197176)
STAGE IV(197680)
STAGE V(1980 onwards)
SATGE I(196066)
Acc to Eric G Falmholtz
First stage (1960-1966)Beginning of academic interest in the area of HRA Second stage(1966-1971)The focus here was more on development and validating deferent models
Third stage(1971-1976)This period was marked by a widespread interest in the field of HR R.G. Barry experiments contributed substantially during the stage Fourth stage(1976-1980)This was the period of decline in the areas of HRA Fifth stage(1980 onwards)There was a sudden renewal of interest in the field of HRA
Provide cost
value information about acquiring, development ,allocating and maintain HR
management to effectively monitor the use of HR
Enable
Find
whether human asset is appreciating or depreciating over a period of time
Assist
in the development of effective management practices persons in the organization to increase their worth by training To provide qualitative information on human resources. (HR) To know whether the human resources have been properly utilized and allocated.
To motivate individual
Put in its simplest form, the main purpose of an HR accounting is to find out how effecti ve and efficient the organization's HR activit ies are, to determine areas for improvement and identify changes.
As a political tool, used to demonstrate mismanagement of human resource As a pedagogical instrument for analyzing and structuring As a decision making aid to ensure that decision on hr are more rational from the management point of view
Foresee the changes Provides different methods of testing Increase productivity Brings high return
Helps individual employee to aspire
Provides scope for advancement
Throws light on the strength and weaknesses of the existing workforce
Not easy to value human asset Results in dehumanizing human resource No evidence HR is full of measurement problem Employees and unions may not like the ideas Unrealistic Lack of empirical evidence
People
are valuable organizational resource
resource value is influenced by management style information is needed
Human
HRA
Infosys was the first software company to value its human resources in 1995-96 The company valued its human resources to Rs 1.86 billion. HRA is very essential for any knowledge intensive company.
Slowly the concept gained importance and companies like satyam computers, and even manufacturing firms like Reliance industries started adopting it. The assets could be classified into tangibles and intangibles. Human resources was an intangible asset which involved capabilities, knowledge, skills, and talents of the employees in the company.
In HRA cost was assigned to every employee when recruited and revenue generated by him/her during the tenure in the company. HRA measured the performance of all the people in the organization and this information was made available to all the stake holders to help them make critical investment decisions. The companies started realizing that human capital was now an investment for future earnings and not expenditure.
A) Cost Based Model Historical Cost Model Replacement Cost Model Opportunity Cost Model Competitive bidding model Standard Cost Model- Standardizing cost for class of employees.
B) Economic Models Goodwill Method HR Value= Goodwill * amt invested in HR/ Total Investment Behavioral Model Lev & Schwartz Model Jaggy & Lau Method Myers & Flowers Method- Employees Value = Employees Attitude index* wages payable to employee
Infosys HRA model was based on the present value of employees future earnings. It had the following assumptions: Employees salary package included all benefits, direct or indirect, earned both in India and foreign nations The additional earnings on the basis of age and was also taken into account. All the employees were divided into 5 groups based on their average age Each group compensation was calculated (including the compensation at retirement) Total compensation of each group was calculated. Sum of all values discounted at 27.36% ( cost of human capital) came to Rs 1.86 billion.
The employee costs remained almost the same. Increase in value addition Net profits increased by more than 150%. Value of human resources per employee increased significantly Information on absenteeism and employee turnover rate Compensation could be decided upon the worth of the employee.
Provided vital information for strategic human resource management
Easier for share holders to make investment decisions Helped to calculate the value of the organization whose intangible assets are more than the tangible assets.
The companies act 1956, did not have a provision for inclusion of human assets in financial statements. In what form and manner, their value to be included in the financial statement is the question yet to be classified on which there is no consensus in the accounting profession. As human resources are not capable of being owned, retained and utilized, unlike the physical assets, there is problem for the management to treat them as assets in the strict sense. There is constant fear of opposition from the trade unions as placing a value on employees would make them claim rewards and compensations based on such valuation. There is no universally accepted method of human asset valuation.
