HUMAN RESOURCE ACCOUNTING

By: Shwetanshu Gupta MBA-49-2013

INTRODUCTION

• HRA is accounting for people as an organizational resource.

• It involves measuring the costs incurred by organizations to recruit,

select, hire, train and develop human assets.

• It also involves measuring the economic value of people to the

organization.

• “HRA is basically an information system that tells management what changes are occurring over time to the human resources of the business.

• HRA also involves accounting for investment in people and their replacement costs, and also the economic value of people in an organization,”

Eric Flamholtz: “ Accounting for people as organizational resources. It is the measurement of the cost and value of people for the organization ”

Stephen Knauf (1983): “ The measurement and quantification of human organizational

inputs such as recruiting, training, experience and commitment ”

DEFINITION

Improve management by analyzing investment in HR.

Considers people as its asset .

Attract and retain qualified people.

To have an analysis of the human asset.

To aid in the development of management principles, and proper decision making for the future and helps to determine financial consequences of various practices.

It provides a sound and effective basis of human asset control, that is, whether the asset is appreciated, depleted or conserved.

OBJECTIVES

ADVANTAGES

Throws light on the strengths and weaknesses of the existing workforce in an organization.

Helps management in recruitment planning.

Offers valuable feedback regarding the effectiveness of HR policies and practices.

Helps potential investors judge a company better on the strength of the human assets utilized therein

Organizations can find out how much they earn from an individual.

Provides a sound and effective basis for human asset control.

Reflects the extent to which organization contributes to society’s human capital by investing in its development.

Not easy to value human resources in an organization

Full of measurement problems

Employee and unions do not like the idea

Empirical evidence does not support the idea

Lack of an industry standard

The need for extensive research

Not an economically viable option for small and medium companies

Difficult to predict as to what is going to be your future requirements

LIMITATIONS

APPROACHES TO HRA

COST APPROACH IN HRA

ECONOMIC VALUE APPROACH