Human Resource Accounting — Whim or Wisdom?

Abstract

Since accounting for an enterprise's human resources was first discussed more than thirty years ago, it has encountered two main barriers to entry into mainstream accounting. These were: 1. that employees do not qualify as assets and 2. an inability to establish a meaningful system of measurement. In the context of current accounting concepts the first of these barriers is discussed establishing the legitimacy of the paradigm. Acceptable methods of measuring the value of assets are examined concluding that the present value, using added value as a base, is most useful for the majority of enterprises. Accepting that human resources are an asset, consideration should also be given to recognising the associated liabilities. The impact of accounting for human resources is examined by reference to a set of published financial statements. With an ever changing accounting environment, the opportunity to recognise human resource assets and liabilities in the financial statements should be taken.

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