Human Resource Accounting: A Human Organizational Measurement Approach, Part II

Likert, Rensis; Pyle, William C.

doi:10.2469/faj.v27.n1.75

Cited by 29 publications

(19 citation statements)

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“…Until the mid-1970s, authors (e.g. Brummet et al, 1968;Flamholtz, 1969Flamholtz, , 1971Flamholtz, , 1999Lev and Schwartz, 1971;Likert and Pyle, 1971;Elias, 1972;Likert and Bowers, 1973;Morse, 1973;Friedman and Lev, 1974;Sackman et al, 1985) proposed various methods for estimating and reporting human capital on the employer's balance sheet. Invariably, these methods consist of capitalizing some expected flow: lifetime income, the firm's abnormal earnings or the cost of recruiting and training personnel.…”

Section: Overview Of the Literaturementioning

confidence: 98%

Self-sorting, incentive compensation and human-capital assets

Abdel-Khalik¹

2003

European Accounting Review

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Skilled labour has gained significance as a production factor in the age of information technology, but accounting does not recognize human capital as an asset that contributes to the firm's earning power. This paper suggests a method to develop a latent index to proxy the managerial-skill component of human capital. The proposed index depends on the empirical validity of self-sorting theories for managerial tasks and the choice of the type of at-risk (i.e. outcome-contingent) compensation contract. The empirical analysis uses data on compensation of executive members of the board of directors, their personal attributes (experience, risk aversion and wealth), firm-specific variables (profitability growth rates, organizational complexity and operating risk), and type of industry. The extent to which equity markets value the predicted labour skills shows that investors in the marketplace recognize human capital even though accounting does not. The valuation coefficient on the variable imputed for human capital is significant for all years examined. This study contributes to the literature by showing that relative incentive compensation (incentive pay per dollar of fixed salary) is a viable surrogate for human capital defined as the skills embodied in people.

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Section: Overview Of the Literaturementioning

confidence: 98%

Self-sorting, incentive compensation and human-capital assets

Abdel-Khalik¹

2003

European Accounting Review

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“…Pyle () and Likert and Pyle () proposed a method of valuing human capital based on the application of historical or replacement (Likert & Pyle, ) cost. Under this approach, an organization capitalizes, records, and treats as assets, employee costs that are expected to result in a future organizational benefit, including hiring and training costs.…”

Section: Human Capital As An Accountable Assetmentioning

confidence: 99%

“…Bassi and Van Buren (1999) extended this approach even further as a measure of investment in training and development, as derived by the average hours and total expense invested . Pyle (1970) and Likert and Pyle (1971) proposed a method of valuing human capital based on the application of historical or replacement (Likert & Pyle, 1971) cost. Under this approach, an organization capitalizes, records, and treats as assets, employee costs that are expected to result in a future organizational benefit, including hiring and training costs.…”

Section: Human Capital As An Accountable Assetmentioning

confidence: 99%

Human Capital: A Strategic Asset Whose Time Has Come to Be Recognized on Organizations' Financial Statements

Sollosy¹,

McInerney²,

Braun³

2016

J. Corp. Acct. Fin

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This article examines the issue of how organizations value human capital—are they treated as the intellectual resource within the asset side of the ledger, or are they an expense that drains the company of cash and risks their competitive advantage? The article will focus on the idea that the value of the human capital assets should be measure and considered part of the organizations market value. The exploration of knowledge‐based economies has strengthened the argument for setting value to those producing creative and innovative processes within the organization. Central to this article is the belief that human capital is an accountable asset that must be valued on corporate financial statements as Infosys has adopted since 2008. While some would argue that financial value cannot be attached to labor, this argument does not seem to be supported in the knowledge‐based economy. If an organization's most valuable asset is its people, then the argument must be broached that accounting standards (such as the Financial Accounting Standards Board [FASB] and generally accepted accounting principles [GAAP]) should keep current with the 21st century. If a true comparison of organizations takes place, can that comparison ignore its human capital? © 2016 Wiley Periodicals, Inc.

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“…Likert one of the earliest proponents of the subject, has listed the following objectives of human resource accounting [6]:…”

Section: Human Resource Auditingmentioning

confidence: 99%

Human resource auditing as a tool of human resource valuation: interface and emerging practices

Batra

1996

Managerial Auditing Journal

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The human resource valuation system cannot be considered to be a complete system of accounting unless it is followed by an equally competent system of auditing. Application or use of human resource accounting, therefore, must also be followed by a separate HR audit to ascertain whether or not the performance of the managers has been true and fair in the overall interests of the organization they serve. The application and usefulness of human resource valuation depends on the future efforts and experiments to be made by practising managers, accountants and academicians. It also needs support from the professional bodies and government. In the absence of human resource valuation, the management may not realize the negative effects of certain programmes aimed at improving profits in the short run. Such programmes may result in decreased value of human assets due to a fall in productivity levels, high labour turnover and low morale. Audit of human resources could help in finding out the efficiency of every segment. Human resource audit could enable the appraisal of the performance of various managers. The basic function and management of human resources is also greatly facilitated. Hence human resource valuation and audit activity could be helpful in improving the efficiency of human resources in the changing business scenario.

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Human Resource Accounting: A Human Organizational Measurement Approach, Part II

Cited by 29 publications

References 0 publications

Self-sorting, incentive compensation and human-capital assets

Self-sorting, incentive compensation and human-capital assets

Human Capital: A Strategic Asset Whose Time Has Come to Be Recognized on Organizations' Financial Statements

Human resource auditing as a tool of human resource valuation: interface and emerging practices

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