Human Resource Accounting Case Study

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Human Resource Accounting

Traditional Managerial accounting involves managers using information of accounting to make informed decisions and judgments on the use and control of assets in the organizations. Human Resources are without one of the most important assets. HR accounting thus a specific field dedicated to the activity of knowing cost invested on employees. This includes costs of recruitment, training, wages and other benefits paid to them in return to their contribution towards the organization and its profitability. In fact, The American Accounting Association’s Committee on Human Resource Accounting (1973) has defined Human Resource Accounting as “the process of identifying and measuring data about human resources and communicating …show more content…

Obtain cost value information for decision making on the acquisition, allocation, development and maintenance of human resources.
4. Evaluate return on investment on human capital.1
Let’s take a closer look into what HRA can do for an organization.
Suppose an organization is planning to expand. This might involve diversification, technological growth or maybe a change in the technology etc. All this is subject to the man power available based which HRA can suggest relevant modifications to the corporate plan and can also make suggestions on the recruitment, transfer, retention, promotion and acquisition of resources.
The corporate plan also involves assigning key positions to the right candidate. More often the success of a project depends on the person leading it. HRA helps the management in the Employment and better utilization of human resources and helps the organization to place the right man in the right post depending on his skills and abilities. (Akrani G.,2014)
Apart from this it can also enhance the competency of the team by providing effective training and development. This way HRA ensures that the resources aren’t wasted and are utilized efficiently to bring higher returns to the organization.2
How is this …show more content…

Since companies can use various HRA models, this comparison becomes difficult. In fact there is no agreement between organizations on the standards to be followed for the measurement process. In fact there will always be a room for error even if standards are agreed upon because it is very hard to assign a numeric value to the capability of a human being.
Secondly, there is a risk that companies can misuse HRA to enhance their image. Just like a balance sheet doesn’t really tell us how well a company is doing, HRA doesn’t give the entire picture. It can be manipulated by companies to enhance their image to investors calling into question the credibility of the implication of numbers.
Thirdly and most importantly is the question of the HR accounting. Some might argue that showing the employees as “Assets” and valuing them would shows their true worth which everyone should appreciate, especially when it’s translated on to the balance sheet. However doing so is “dehumanizing” a resource or manipulating them. A resource who’s valued less might be discouraged from working to his full potential. Such allocation of “numeric” value to a human resource may lead to division in the rank of employees and might also cause conflicts for the organization with labor unions.
A brief note on HRA in

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