Human assets and whether there should be a value on humans has been a controversial issue in the recent years. Some individuals have argued that humans could be classified as assets because humans are a valuable resource of a business and placing value will help indicate importance to managers in order to cultivate the asset. However, others may object to the idea that humans are assets as this could be seen as demeaning; being listed alongside other business assets including inventory, plant and machinery. This essay will examine the issues around the inclusion of human assets on the balance sheet and will analyse the difference between the types of assets comprising of tangible and intangible assets. An asset is a resource with financial value that the firm possesses or control; assets increase the value of the firm and generate cash flow. Assets also include tangible and intangible assets. Intangible assets are resources that are not physical in nature, these include intellectual property including patents, copyrights and brand recognition. Human capital could be seen as an intangible resource as individuals have the abilities and have the skill set, thus others argue that you cannot own employees’ abilities and control employees. Some firms recognise the importance of a capable workforce, Google for example in 2014 reportedly ‘invested $14 million’ within their training (Forbes, 1). This demonstrates that the employees are important but moreover the expertise and innovative ideas that the employees possess are vital within the firm. The importance of the intangible asset of expertise are cultivated and acknowledged within firms like Google. The expertise and recruitment of highly skilled employees could be incredibly difficult... ... middle of paper ... ...s provide to the business, add great value and are vital to the future success of the business. Therefore, the importance of intangible assets such as employee’s expertise would be seen as an asset, hence the business do not have ownership of the employees. Consequently, the business cannot place a value and class employees as ‘human assets’ on the balance sheet. However, whilst it is important to consider a workforce as an intangible resource, some individuals believe human assets could meet the conventional definition of a tangible asset for inclusion on the balance sheet. A possible method is prepayments of wages within the balance sheet. At present, we have seen that employees are not accounted for on the balance sheet and would possibly remain this way in a long time as measuring and valuing the worth of employees would not be a straight forward decision.
A strong balance sheet gives an investor an idea of how financially stable the company really is. Many professionals consider the top line, or cash, the most important item on a company’s balance sheet. The big three categories on any balance sheet are “assets, liabilities, and shareholder equity.” Evaluating Barnes & Noble’s assets for the time 2014 at $3,537,449, 2013 at $3,732,536 and 2012 at $3,774,699, the company’s performance summarizes that it is remaining stable. These numbers reflect a steady rate over the three year period. Like assets, liabilities are current or noncurrent. Current liabilities are obligations due within a year. Key investors look for companies with fewer liabilities than assets. Analyzing this type of important information, informs a potential investor that if the company owes more money than they are bringing in that this company is in financial trouble. Assessing the liabilities of the balance sheet, for the same time period, it is also consistent with the assets. The cash flow demonstrates a stable performance in the company’s assets and would be determined that the liabilities of this company are also stable. Equity is equal to assets minus liabilities, and it represents how much the company’s shareholders actually have a claim to. Investors customarily observe closely
How well a business manages its assets and resources predicates its overall success. Companies that spend financial resources foolishly are apt to find themselves in bankruptcy. Companies that work capital equipment resources beyond the machine’s capabilities or for other than intended purposes are apt to experience downtime and/or lose the equipment to failure. The same premise holds true for a company’s human assets. However, unlike other company assets, which depreciate over time, human assets appreciate over time when managed properly. The article, Importance of Human Resource Investment for Organizations and Economy: A critical Analysis, explains the importance of managing human assets as follows:
AASB 138 defines an intangible asset as ‘an identifiable non-monetary asset without physical substance’. Some examples intangible assets are patents, computer software, licenses, trademarks or brand names, customer lists, patents and copyrights. An item must meet the following criteria to be defined as an intangible asset: a) Identifiability: an ‘intangible asset requires being identifiable to distinguish it from goodwill’.
Resources are organization’s productive assets and capabilities are what an organization is capable of doing. The relationship between resources and capabilities of a company forms a competitive advantage. Capabilities and resources help in gaining value and competitive advantage over competitors.
Asset mapping is one of the highlights form this semester. Bergdall (2003) defines asset-based development as a mobilization of skills, resources and commitment of the residents along with others grounded in the area to strengthen the economic and social well-being of the entire community. As I revised my personal asset map, I reflected on this definition of asset-based development and made the connections of how I can leverage the resources that I have towards my economic and social well-being. Throughout the semester, I have been intrigued by the connection between my personal asset map and the organizational asset map. While the organization can utilize both internal and external resources, a thorough understanding of individual assets in the organization is critical towards strengthening the functioning of the organization. My understanding of the networks, skills and interests that I bring to the table is critical for the organization because this enables me to use those skills to leverage resources as a catalyst at the organizational level. About two years ago I took a class on individua...
Moberly, M. (2014). Business IP and Intangible Asset Blog. Company Culture and Reputation. Retrieved from http://kpstrat.com/blog/?cat=1052
...as human are not dehumanized as a tool but instead a capital that are resourceful for the company to move on.
From an accountant's perspective, goodwill appears in accounts of a company only when the company has purchased some intangible and valuable economic source. Intangibles such as patents and copyrights are examples of identifiable intangible assets. On the other hand, intangibles such as favorable government regulations, outstanding credit ratings, superior management and good labor relations are examples of unidentifiable intangible assets (Tweedie, 27). Goodwill comprises the complete set of unidentifiable intangible assets held by the reporting entity. Generally, goodwill has appeared to be an umbrella concept embracing many features of a company's activities that could lead to superior earning power, such as excellent management, an outstanding workforce, effective advertising and market penetration.
Expertise of the workforce: Current accounting practices do not allow for the inclusion of knowledge or business acumen to be included within the balance sheet. In this way there is no allowance for the expertise of the workforce or the value of human resources to be recorded as an asset on the balance sheet.
Balance sheets are very important for parties like suppliers, investors, competitors, customers, etc. to know the company’s position, company’s strength and company’s weaknesses. Balance sheets helps to ascertain the amount of capital employed in the business so that we can further calculate different types of ratios. Some important objectives of preparing balance sheets are:
Assets are useful or valuable things that an individual or organisation has. This could include certain skills, abilities or personal qualities that an individual may possess and the organisations and resources they have access to within their community. An asset-based approach focuses on what people have and can do rather than what they are lacking and cannot do. Organisations work with individuals focusing on their valuable qualities in order to takes steps in working towards a positive outcome for the future.
The revenue/cost period-: Revenue and the cost period in accounting that the company get income from normal business activities. It’s referred to normal business income that the company got by selling their product and service.
Maintaining a company’s financial assets is a daunting task. Cash management techniques and short-term financing provide accounting executives with the tools needed to survive the constant changes within the economy. The combination of these tools and the knowledge of the world economy will assist companies in maintaining current assets and facilitates growth.
In conclusion, no doubt the workforce will be a valuable asset if it is managed correctly and the opposite when it is not being pinpointed.
It is the intangible goods that one realizes, through ownership, a new sense of self. Through current events such as Teigen's post to the American revolution that changed our history, ownership brought success once each and everyone found their new sense of self.