Human Resource Accounting

HRA

1. SUBMITTED TO: Dr . S R Patel Associate Professor College of Agriculture,AAU,Jabugam SUBMITTED BY : Haseena Bibi 04-2599-2015 M.Sc (Extension Education) Presentation on “ Human Resourse Accounting”

2. HUMAN RESOURCE ACCOUNTING

3. CONTENTS Introduction Definitions Objectives Advantages Position of HRA in India Need &Importance of HRA Limitations Measurement in HRA Methods of HRA Summary

4. Introduction Process of identifying and measuring data about human resources and communicating this information to interested parties. Quantification of the economic value of the people in an organization. Art of valuing, recording and presenting systematically the worth of human resources in the books of account of an organization.

5. Definitions “Human resource accounting is the measurement of the cost and value of the people for the organisation.”   Eric Flamholtz of University of California, Los Angeles “ The measurement and quantification of human organizational inputs such as recruiting, training, experience and commitment ” Stephen Knauf (1983) “Human Resource Accounting is the process of identifying and measuring data about human resources and communicating this information to interested parties.”  American Accounting Society Committee on HRA 

6. Objectives Improve management by analyzing investment in HR Consider people as its asset Attract and retain qualified people Profile the organization in financial terms To have an analysis of the human asset To aid in the development of management principles, and proper decision making for the future It provides a sound and effective basis of human asset control, that is, whether the asset is appreciated, depleted or conserved

7. 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.

8. Position of HRA in India In India, very few companies use HRA. HRA is not compulsory in India. Infosys Technologies and BPL are the leading companies in India, which use HRA. HRA reports give useful information to the company management, employees and investors. 

9. Need &Importance of HRA It develops effective managerial decision making. It enhances the quality of management. It prevents misuse of human resources. It helps the efficient allocation of resources. It increases human asset productivity. It improves their morale, cooperation, job satisfaction and creativity.

10. Cont… It influences the individual behavior, attitude and thinking in desired direction It helps in long term investment decisions. It provides good basis of human asset control. It helps the development of management principles. It ensures good monitoring of effective uses of human resources.   It develops human efficiency.

11. Limitations No specific procedure for finding cost and value of human resources of an organization. Form and manner of including HRA value in the financial statement is not clear. Employee with a comparatively low value may feel discouraged. Tax laws do not recognize human beings as assets.

12. Measurement in HRA

13. Methods of HRA Historical Cost Method Replacement Cost Method Opportunity Cost Method Capitalization of Salary Method Economic Valuation Method Return on Efforts Employed Method Adjusted Discounted Future Wages Method Reward Valuation Method Standard Cost Method Currant Purchasing Power Method

14. Summary Human resource accounting provides quantitative information about the value of human assets, which helps the top management to take decisions regarding the adequacy of human resources. Based on these insights, further steps for recruitment and selection of personnel are taken. Outside the organization, quantitative data on the most valuable asset has an impact on the decisions of the investors, clients, and potential staff of the company. When proper valuation and accounting of the human resources is not done then the management may not be able to recognize the negative effects of certain programmes, which are aimed at improving profits in the short run. If not recognized on time, these programmes could lead to a fall in productivity levels, high turnover rate existing employees.

15. Any Question ???