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To record, report and analysis human resource related figures through accounting system
The result can be use for decision making purpose
Human capital becomes the most important asset in the corporation to extract value Present accounting system ignores the importance of human resource value Managers lack information about the effectiveness and efficiency of human resource investment
Generally Accepted Accounting Principle(GAAP) treats most human capital related costs as expenses, instead of assets The more the company invests in human capital, the less the current net income Revenue-Expense(including HR)=Net Income
Financial ratios, based on financial statements, provide little or bias human capital profitability information, for example
ROA: based on hard asset Return on Investment(ROI): The I represents the investment on hard assets Assets Turnover: Sales/Total hard assets
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Reasons why GAAP does not allow human capital investment becomes assets
Future benefit uncertainty Conservatism Ethical issue
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Managers lack information about the effectiveness and efficiency of human resource investment
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Financial (human resource accounting, use accounting system to collect data) Non-financial (use questionnaire)
Personal background, such as age, gender, education, experiences and licenses. Personal characteristics, such and personal traits.
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Some personal background and personal characteristic, together with human capital cost, do have significant influences on operating results Capitalizing human capital cost may improve the quality of earning.
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The Limitation
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Future development
The influence of mark to market value accounting(such as the evaluation of investments) on human resource accounting R & D cost also faces the future benefit uncertainty problem, does the accounting treatment for R & D provide any guidance for human resource cost?
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