Human Resource Accounting Case Study

1829 Words4 Pages

ASSIGNMENT:
1. Identify a company which had valued its employees and shown in the balance sheet and analyse that in terms of the following:
• Method used for valuing human resources
• How cost of hiring and training dealt with
• Benefits the company has derived from this exercise

HUMAN RESOURCE ACCOUNTING

“Human Resource Accounting is an attempt to identify and report investments made in human resources of an organization that are presently not accounted for in conventional accounting practice. Basically it is an information system that tells the management what changes over time are occurring to the human resource in the business.” - Woodruff “Human resource accounting is the measurement of the cost and value of the people for the organization.” …show more content…

Infosys, has started showing human resource as an asset in its balance sheet, and has subsequently been reaping high market valuations. Human Resources accounting, which also known as Human Asset Accounting, involves identifying, measuring, capturing, tracking and analyzing the potential of the human resources of a company and communicating the resultant information to the stakeholders of the company. It is a method by which a cost was assigned to every employee during recruitment, and the value that the employee would generate in the future. Human Resource accounting reflects the potential of the human resources of an organization in monetary terms, in its financial statement. The Value of Human Resource will be shown on the Assets side of the balance sheet under Intangible Assets along with the Brand value. The very same amount will be balanced by opening the capital reserve A/c and transferring the whole value of Intangible Assets to that a/c. Comparison with the Traditional Balance Sheet: The only difference between the Traditional Balance Sheet and the one in which the Intangible assets are included, is that intangible assets will be included in the later . The amount of Intangibles will be transferred to Capital a/c just in order to show the balancing effect because valuation of Human Resource in done by way of Lev and Schwartz Model which takes into account the present value of future earning of its employees until they retire. However no such fund is maintained, the valuation is done in order to get the valuation of Human Resource. The current year’s amount of intangibles may be treated in the P/L a/c and the remaining amount in unabsorbed reserve will be shown under capital reserve. Infosys used the Lev and Schwartz method to value Human Resource .According to this model the present

Open Document