Paper Title
Eze Joseph Chukwudi
Management and Financial Studies

Human Resource Accounting (HRA) is the process of identifying, measuring data about human resources and communicating this information to interested parties.  The major objects of this paper are to x-ray the major characteristics of human resource accounting [HRA] along with the resulting benefits, issues and challenges in implementations.  The study forms mainly the extensive review, review of rated literature. the major benefits of such accounting are that it develops effective managerial  decision making, prevents misuse of human resource enhances human asset productivity, job satisfaction, quality management, creativity etc. The challengers and issues involve are that uncertainty of human resources creates uncertainty in valuation of human resources. Nature of amortization, valuation and its accounting treatments are also other difficulties as there is no specifics IAS/IFRS for such treatment.  It was discovered that human resources has a positive effect on the profit and capital employed by organization Lending credence to the findings of Ashton [2003] that there is association between components of intellectual capital and firm –and-market level financial outcomes.  It was recommended that the likely length of time an employee will spend in an organization should be considered during recruitment and such estimated human resource be capitalized and amortized overtime. 

human resource, accounting treatment, management decision


Human Resource Accounting (HRA) is a new branch of accounting.  It follows the traditional concept that all expenditure on human capital formation is taken as a charge against the revenue of the period as it does not create any physical asset.  Modern view is that cost incurred on any asset as human resources need to be capitalized as it provides benefits measureable in monetary terms.  Measurement of cost and value of people to organizations is highly important, costs incurred in recruitment, selection, hiring, training and development of employees along with their economic values are very much relevant for Human Resource Accounting. American Accounting Association (1973) has defined Human Resource Accounting (HRA) as “the process of identifying and measuring data about human resources and communicating this information to interested Parties”. Eric Flamholtz (1971) expressed a similar definition for Human Resource Accounting as “the measurement and reporting of the cost and value of people in organizational resources”. Moreover, Stephen Knauf (1983) defined Human Resource as “the measurement and quantification of human organization inputs such as recruiting, training, experience and commitment”. Amiral Islam et al (2013) opined that Human Resource Accounting is “the art of valuing, recording and presenting the work of all human resources in accounts of an organization”. It is an information system towards the changes in human resources of an organization.


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