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PRESENTED BY

SHAMNA MOHAMMED KUTTY


ROLL NO:48
Accounting for the human resources deals with
the
measurement of costs which are associated
with
recruiting, selecting, training, placing and
developing
the employees of an organization. This also
involves
measuring the present economic value of
human
American Accounting Association has defined
Human
Resource Accounting (HRA) “as a process of
identifying and measuring data about human
resources and communicating this information
to the
interested parties”.
1. It helps in giving valuable information to
the management for effective planning and
managing human resources.
2. It helps in measurement of standard cost of
recruiting, selecting, hiring and training
people and organization can select a
person with highest expected realisable
value .
1. HRA can change the attitude of mangers,
thereby,
they would try to maximise the expected
value of human resources and effective use
of human
resources in the organization.

5. It also provides necessary data to devise


suitable
promotion policy, congenial work
environment and
job satisfaction to the people.
1. There is no well-set standard accounting
practice
for measuring the value of human
resources.

4. The valuation of human resources is based


on the
assumption that the employees may
remain with
the organization for certain specified
1. There is a possibility that human resource
accounting may lead to the
dehumanization in the organization if the
valuation is not done correctly.

4. There is also a possibility that trade unions


may
oppose the use of HRA. They may want
parity of
wages/salaries and value of the employees.
Valuation of the human asset is the most
important
aspect of Human Resources Accounting. A
recent
trend in today’s corporate world is to measure
the
value of intangible assets such as goodwill,
patent,
brands and now human assets.
The major methods of valuation of human
assets are
historical cost, replacement cost, standard
cost,
present value of the future earnings and
expected
realisable value.

6.Historical Cost Method:


This method is based on cost incurred on
human resources such a cost may be of two
types-Acquisition cost and learning cost.
Learning cost involves expenses incurred on
training
and development. This method is very simple
in its
application but it does not reflect the true
value of
human assets. For example, an experienced
employee
may not require much training and therefore
his value
may appear to be low though his real value is
1. Replacement cost method:
This method values the human resources
as what it
would cost to replace the organization's
existing
human resources. This cost would include
the cost of recruiting, training and
familiarisation as well as
the opportunity cost from lost revenue
during the
period of training.
1. Standard Cost Method:
According to this method, employees of an
organization are categorised in to different
groups
based on their hierarchical position.
Standard cost
is fixed for each category of employees and
their
value is calculated. This method is simple
but does
not take into account difference in
employees put in the same group.
Present value of future earnings Method:
In this method, the future earning of
various
groups of employees are estimated up to
the age of
their retirement and are discounted at a
predetermined rate to obtain the present
value of
such earning. However this method does
not give correct value of human assets as it
does not
measure their contribution to achieving
This method is based on the assumption,
and this
is true also, that there is no direct
relationship
between cost incurred on an individual and
his
value of organization.
Individual Instrument Elements of
attributes al Conditional
individual value
determinan
ts
Cognitive Skills
abilities Activation Promotabilit Individual
personalit level y condition
y traits attributes Productivity al value
Transferabili
ty
Organizatio
nal Satisfactio
IERV
structure Role n with
Managemen Reward organizati
t system s on Promota
bility of
maintain
Instrumental org
Org ing org
determinants
attribute member
s s
Model of the determinants of an individual
value to an Organization