Journal of International Business and Cultural Studies
Human resource accounting and international developments: implications for measurement of human capital Maria L. Bullen Clayton State University Kel-Ann Eyler Wesleyan College Abstract Human Resource Accounting (HRA) involves accounting for expenditures related to human resources as assets as opposed to traditional accounting which treats these costs as expenses that reduce profit. Interest and contributions to growth in HRA have been evident in a number of countries. The strong growth of international financial reporting standards (IFRS) is an indication that the environment for international financial accounting is one that potentially encourages the consideration of alternative measurement and reporting standards and lends support to the possibility that future financial reports may include nontraditional measurements such as the value of human resources using HRA methods. Keywords: Human Resource Accounting, Human Capital, Intellectual Capital, International Accounting, International Financial Reporting, International Financial Reporting Standards
Human Resource Accounting, Page 1
Journal of International Business and Cultural Studies Introduction Human Resource Accounting (HRA) involves accounting for the company’s management and employees as human capital that provides future benefits. In the HRA approach, expenditures related to human resources are reported as assets on the balance sheet as opposed to the traditional accounting approach which treats costs related to a company’s human resources as expenses on the income statement that reduce profit. HRA suggests that in addition to the measures themselves, the process of measurement has relevance in decision-making involving organizations. Although the origins and early development of HRA occurred mostly in the United States, interest and contributions to growth in the field have been evident in a number of other countries. This paper provides a brief overview of HRA from an international perspective. In recent years, the financial reporting standards used in the United States, often referred to as Generally Accepted Accounting Principles (GAAP), have been moving toward adoption of more complex measurement methods compared with the traditional historical cost approach to asset measurement. The strong growth of international financial reporting standards (IFRS) is another indication that the environment for financial accounting reporting is one that potentially encourages the consideration of alternative measurement and reporting standards. Accountants and others in the financial reporting environment have become accustomed to using more complex measurement approaches to the financial statement reported amounts. This would lend support to the possibility that future financial reports may include nontraditional measurements such as the value of human resources using HRA methods. Early Developments of HRA in the United States Research during the early stages of development of HRA was conducted at the University of Michigan by a research team including the late organizational psychologist Rensis Likert, founder of the University of Michigan Institute of Social Research and well known for his work on management styles and management theory (Likert, 1961, 1967), faculty member R. Lee Brummet, and then Ph.D. candidates William C. Pyle and Eric Flamholtz. The group worked on a series of research projects designed to develop concepts and methods of accounting for human resources. One outcome of this research ( Brummet, Flamholtz & Pyle, 1968a) was a paper representing one of the earliest studies dealing with human resource measurement-- and the one in which the term “Human Resource Accounting” was used for the first time. Brummet, Flamholtz & Pyle (1968b) also published another article in which they assessed the impact that HRA can have on management. Flamholtz’s (1969) Ph.D. dissertation, an exploratory study in...
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