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Human Resourse Accounting

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Human resource accounting (HRA) as an approach was originally defined as the process of identifying, measuring and communicating information about human resources in order to facilitate effective management within an organisation. It is an extension of the accounting principles of matching costs and revenues and of organising data to communicate relevant information in financial terms.
The accounting of human resources can be seen as just as much a question of philosophy as of technique. This is one of the reasons behind the variety of approaches and is further underlined by the broad range of purposes for which accounting human resources can be used, e.g. as an information tool for internal and/or external use (employees, customers, investors, etc.), and as a decision-making tool for human resource management (investments in human resources as well as personnel management in general).

Historical cost approach

This was the first attempt towards employee valuation made by R. G. Barry Corporation of Columbus, Ohio in the year 1967. This method measures the organization’s investment in employees using the five parameters: recruiting, acquisition; formal training and familiarization; informal training, Informal familiarization; experience; and development. The costs were amortized over the expected working lives of individuals and unamortized costs (for example, when an individual left the firm) were written off.
[edit] Limitations

* The valuation method is based on false assumption that the dollar is stable. * Since the assets cannot be sold there is no independent check of valuation. * This method measures only the costs to the organization but ignores completely any measure of the value of the employee to the organization (Cascio 3).

[edit] Replacement Cost approach

This approach measures the cost of replacing an employee. According to…...

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