Hr Accounting Policies in Infosys
Human Resources Accounting in Infosys
VALUING HUMAN RESOURCES
QUESTIONS FOR DISCUSSIONS
Q1. By early 2000, many companies in India had started valuing their human capital and reported the same in their balance sheets and other financial statements.
Briefly explain the concept of valuation of human resources and compare the various models available for human resources accounting.
Ans:
HRA involved 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 was a method by which a cost was assigned to every employee when recruited and the value that employee generated during the tenure he/she worked .for the company. HRA reflected the potential of the human resources of an organization in monetary terms, in ifmancial statements.
The two main components of HRA were investment related to employees and the value generated by them. Investment in human capital included all costs incurred in increasing and upgrading the employees' skill sets and knowledge of human resources. The output that an organization generated nom human resources was regarded as the value of its human resources.
VARIOUS MODELS OF HRA
Historical Cost Method:
The costs, which were incurred on the development of human resources, were with intention to obtain future benefits.
Therefore, these costs were not to be treated as expenditure,but investments, future revenues or assets. The expenditure incurred by an organization on recruiting, selecting, trainig and developing employees had to be capitalized and shown in the balance sheet as assets, as the humans possess some skills, knowledge and experience which could be turned into value for tbe organization. However', it was argued by some critics that costs did not reflect the true value and truevalue could be known only by the difference between real performance and the
cost
VALUING HUMAN RESOURCES
QUESTIONS FOR DISCUSSIONS
Q1. By early 2000, many companies in India had started valuing their human capital and reported the same in their balance sheets and other financial statements.
Briefly explain the concept of valuation of human resources and compare the various models available for human resources accounting.
Ans:
HRA involved 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 was a method by which a cost was assigned to every employee when recruited and the value that employee generated during the tenure he/she worked .for the company. HRA reflected the potential of the human resources of an organization in monetary terms, in ifmancial statements.
The two main components of HRA were investment related to employees and the value generated by them. Investment in human capital included all costs incurred in increasing and upgrading the employees' skill sets and knowledge of human resources. The output that an organization generated nom human resources was regarded as the value of its human resources.
VARIOUS MODELS OF HRA
Historical Cost Method:
The costs, which were incurred on the development of human resources, were with intention to obtain future benefits.
Therefore, these costs were not to be treated as expenditure,but investments, future revenues or assets. The expenditure incurred by an organization on recruiting, selecting, trainig and developing employees had to be capitalized and shown in the balance sheet as assets, as the humans possess some skills, knowledge and experience which could be turned into value for tbe organization. However', it was argued by some critics that costs did not reflect the true value and truevalue could be known only by the difference between real performance and the
cost