Introduction of human resource accounting(HRM

Ku-Jun Lin Associate Professor Tam Kang University

What is human resource accounting? 

record, report and analysis human resource related figures through accounting system  The result can be use for decision making purpose


3 .What is the value of human? is priceless.  Human ± How do you calculate the value of an employee in the company? ‡ Minimum value = The present value of her(his) salary in the future. by considering the possibility of early absence.  Human capital can be counted.

Why human resource accounting? 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  Human 4 .

Human capital becomes the most important asset in the corporation  More service(human intelligence) oriented company than before ± Higher Tobin¶s Q(Price/Equity) ± Higher Return on Assets(ROE)  The importance of capital shifts from financial capital to intellectual capital 5 .

 Intellectual capital including ± human capital. ± organizational capital ‡ ‡ ‡ ‡ Relation capital(outside) Customer capital(outside) Process capital(inside) Learning and development capital(inside) 6 .

 Characteristics of Human capital ± Hard to imitate ± Causal ambiguous ± Cannot duplicate in a short time 7 .

the less the current net income Revenue-Expense(including HR)=Net Income 8 . instead of assets The more the company invests in human capital.Present accounting system ignores the importance of human resource value    Generally Accepted Accounting Principle(GAAP) treats most human capital related costs as expenses.

 Financial ratios. for example ± ROA: based on hard asset ± Return on Investment(ROI): The ³I´ represents the investment on hard assets ± Assets Turnover: Sales/Total ³hard ´assets 9 . based on financial statements. provide little or bias human capital profitability information.

 Reasons why GAAP does not allow human capital investment becomes assets ± Future benefit uncertainty ± Conservatism ± Ethical issue 10 .

immediate positive impact on current net income VS effect on long term profit ± Impacts on employee¶s feeling which may negatively influence company income 11 .Managers lack information about the effectiveness and efficiency of human resource investment  Lay off decisions ± Does the lost training cost and future orientation cost be considered? ± Short term.

 Investment in human capital decisions ± Where is the beef? ± What is the relationship between human capital investment and operation result? ± The communication of company human capital to investors. 12 .

125) ± Not all employees are classified as human capital ± Value VS Uniqueness(Lepak & Snell. 1999) ± High value Employees can be considered as human capital ± Human capital in quadrant 1are most valuable 123 13 .The Human capital Architecture  The classification of Human capital (Please see Figure 1 on P.

Learning costs in the middle stage of development. Formation and acquisition costs at the early stage of development. discharge cost 14 . eg. eg. Replacement costs at the final stages of development.Costs related to human capital  1. Recruiting cost  2. Training cost  3. eg.

Human resource factors that may have influence on operation result  Financial(human resource accounting. education. gender. such and personal traits 15 . such as age. experiences and licenses. ± Personal characteristics. use accounting system to collect data)  Non financial(use questionnaire) ± Personal background.

such as customer capital between human capital and operation result. usually it does not show significant influence on operation result in most companies.My research summary   If we consider human capital cost as the only variable. However. usually human capital would demonstrate significant influence on operating result through the intermediate variable. 16 . if we use an intermediate variable.

do have significant influences on operating results  Capitalizing human capital cost may improve the quality of earning. 17 . Some personal background and personal characteristic. together with human capital cost.

The Limitation  Hard to find specific human resource data  Case study rather than general study 18 .

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? 19 .

Thank you for listening Q&A 20 .

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