HUMAN RESOURCE ACCOUNTING

PREPARED BY :
SUDHANSHU SHARMA MBA-II sem. H.I.M.C.S.

DEFINITION OF H.R.ACCOUNTING
Human Resource Accounting is, The process of identifying and measuring data about human resource and communicating this information to intrested parties - AMERICAN ACCOUNTING ASSOCIATION COMMITTEE

HISTORICAL DEVELOPMENT OF H.R.ACCOUNTING

According to Eric G Falmholtz

FIRST STAGE (1960-1966)

begening of academic interest in the area of HRA

SECOND STAGE (1966-1971)

The focus here was more on developing and validating different models of HRA

Cont..

THIRD STAGE (1971-1976)

This period was marked by a widespread interest in the field of HRA.

R.G.Barry experiments contributed substantially during this stage

FOURTH STAGE (1976-1980) This was the period of decline in the area of HRA FIFTH STAGE (1980 onwards )
There was a sudden renewal of interest in the field of HRA

OBJECTIVES OF H.R.ACCOUNTING

Provide cost value information about acquiring, developing, allocating and maintaining HR. Enable mgmt.to effectively monitor the use of HR. Find whether human asset is appreciating or depriciating over a period of time. Assist in the development of effective management practices. To motivate individual persons in the organization to increase their worth by training. In planning physical resource vis--vis HR by giving valuable information.

PURPOSE OF HR ACCOUNTING
Use of resources to achieve the immediate and long-run goals of the organization. Traditional accounting involves treatment of human capital and non-human capital differently. Conventional treatment on human resource.

USES OF HR ACCOUNTING
according to Grojer and Johansson

As a political tool, used to demonstrate mismanagement of human resource. As a pedagogical instrument for analyzing and structuring. As a decision making aid to ensure that decision on HR are more rational from the management point of view.

ADVANTAGES OF HR ACCOUNTING

Foresee the changes Provides different methods of testing Increase productivity Brings high return Helps individual employee to aspire Provides scope for advancement Throws light on the strength and weaknesses of the existing workforce Helps potential investor judge a company

LIMITATIONS OF HR ACCOUNTING

Not easy to value human asset. Results in dehumanizing human resource. No evidence. HR is full of measurement problem. Employees and Unions may not like the ideas. Unrealistic. Lack of Empirical evidence.

ASSUMPTIONS UNDERLYING H.R.ACCOUNTING

People are valuable organizational resource. Human Resource value is influenced by management style. HRA information is needed.

METHODS OF H.R.ACCOUNTING
* COST APPROACH- Historical Cost Approach - Replacement Cost - Standard cost method - Present value - Opportunity Cost method - Economic Value method * ECONOMIC VALUE APPROACH

HUMAN RESOURCE AUDIT

The word AUDIT comes from the latin verb audire which means, to listen

HR Audit is a tool which helps assesss effictiveness of HR functions of an organization.

NATURE OF HUMAN RESOURCE AUDIT

s ctivitie A HRM

it Aud HRM

es tcom Ou HRM

WHY CONDUCT AN HR AUDIT ?

Ensure compliance

Improve HR practices Train your managers Prepare for potential government audit or litigation Gain an understanding of departments environment Show a good faith effort Correct errors

SCOPE OF AUDIT

Audit of human resource function. Audit of managerial compilance. Audit of human resource climate. - Employee turnover.
- Absenteeism. - Safety records. - Attitudes survays.

Audit of corporate strategy.

BASIC PRINCIPLES OF AUDITS

1. Identify the Scope 2. Develop a Questionnaire 3. Collect Data 4. Benchmark Findings 5. Provide Feedback about Results 6. Create Action Plans 7. Foster Climate of Continuous Improvement

APPROACHES TO HUMAN RESOURCE AUDIT

Comparative Approach, Outside Authority Approach, Statistical Approach, Compliance Approach, and Management By Objectives (MBO) Approach

TYPES OF AUDIT

INTERNAL AUDIT :
The internal audit is conducted by the company's own ataff as a part of their control activities.

EXTERNAL AUDIT :
The external audit is conducted by outsiders specifically employed for this purpose. The advantage is to get the unbiased evaluation by competent people of the manpower management function.

BEFORE YOU BEGAIN THE AUDIT PROCESS :

1. Determine who will conduct the audit. Internal vs. External

2. Secure senior management commitment. a. Are they ready to fix whats broken, even if it costs $$$$? b. Do they agree with the methodology? c. Will they allow access to all departments/information? d. Will they publicly support the process?

Before you begin the audit process

3. Define the parameters. a. Who will be audited? b. What do you want to audit? c. What audit tools will you use? d. How will the process be rolled out? e. How will results get reported? f. Who will get the results?

4. Introduce the audit process to your managers.

H.R.AUDIT PROCESS
PRE-AUDIT INFORMATION PRE-AUDIT SELF ASSESSMENT
ON-SITE REVIEW

RECORDS REVIEW

AUDIT REPORT