INTRODUCTION

Success of corporate undertakings purely depends upon the quality of human resources. It is accentuated that; Human element is the most important input in any corporate enterprise. The investments directed to raise knowledge; skills and aptitudes of the work force of the organization are the investments in human resource. In this context, it is worth while to examine and human resource accounting practices in corporate sector in India. Human resource accounting is of recent origin and is struggling for acceptance. .It is clearly said that, Human resources accounting is an accounting measurement system and a large body of literature has been published in the last decade setting for the various procedures for measurement. At the same time the theory and underlying concepts of accounting measurement have received sizeable attention from academics and a substantial body of literature has developed. The conventional accountings of human resources are not recognized as physical or financial assets. Though Human Resources Accounting was introduced way back in the 1980s, it started gaining popularity in India after it was adopted and popularized by NLC. Human Resources accounting, also known as Human Asset Accounting, 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 the employee would generate in the future. Human Resource accounting reflected the potential of the human resources of an organization in monetary terms, in its financial statements. Even though the situation prevails, yet, a growing trend towards the measurement and reporting of human resources particularly in public sector is noticeable during the past few years. BHEL, Cement Corporation of India, ONGC, Engineers India Ltd., National Thermal Corporation, Minerals and Metals Trading Corporation, Madras Refineries, Oil India Ltd., Associated

Cement Companies, SPIC, Metallurgical and Engineering consultants India Limited, Cochin Refineries Ltd. Etc. are some of the organizations, which have started disclosing some valuable information regarding human resources in their financial statements. It is needless to mention here that, the importance of human resources in business organization as productive resources was by and large ignored by the accountants until two decades ago. During the early and mid 1980s, behavioral scientists attacked the conventional accounting system for its failure to value the human resources of the organization along with its other material resources. In this changing perspective the accountants were also called upon to play their role by assigning monetary value to the human resources deployed in the organization. Human Resource Accounting involves the dimension of cost incurred by the organization for all the personnel function. Hence the issue is to be addressed is how to measure the economic value of the people to the organization and various cost based measures to be taken for human resources. The two main components of Human Resources Accounting 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 from human resources was regarded as the value of its human resources. Human Resources accounting is used to measure the performance of all the people in the organization, and when this was made available to the stakeholders in the form of a report, it helped them to take critical investment decisions. All the models stressed that human capital was considered an investment for future earnings, and not expenditure. For valuing human resources, different models have been developed. Some of them are opportunity cost Approach, standard cost approach, current purchasing power Approach, Lev and Schwartz present value of future earnings Model Flam holtzs stochastic rewards valuation Models etc. Of these, the model suggested by Lev and Schwartz has become popular. Under this method, the future earnings of the human resources of the organization

until their retirement is aggregated and discounted at the cost of capital to arrive at the present value. Human resources accounting system consists of two aspects namely: a) b) The investment made in human resources The value human resource

Measurement of the investments in human resources will help to evaluate the charges in human resource investment over a period of time. The information generated by the analysis of investment in human resources has many applications for managerial purposes. The organizational human performance can be evaluated with the help of such an analysis. It also helps in guiding the management to frame policies for human resource management. The present performance result will act as input for future planning and the present planning will have its impact on future result. The same relationship is also applicable to the areas of managerial applications in relation to the human resource planning and control. Investment in human resources can be highlighted under two heads, namely, Investment pattern: The human resource investment usually consists of the following items:1) 2) 3) 4) 5) 6) 7) 8) 9) Expenditure on advertisement for recruitment Cost of selection Training cost On the job training cost Subsistence allowance Contribution to provident Fund Educational tour expenses Medical expenses Ex-gratia payments 10) Employees Welfare Fund

All these items influence directly or indirectly the human resources and the productivity of the organization. Investment in current costs After analyzing the investment pattern in the human resources of an organization the current cost of human resources can be ascertained. For this purpose, current cost is defined as the cost incurred with which derives benefit of current nature. These are the costs, which have little bearing on future cost. Thus, the expenses incurred for the maintenance of human resources are termed as current costs. Current cost consists of salary and wages, Dearness allowance, overtime wages, bonus, house rent allowance, special pay and personal pay. Amidst this background, it is significant to mention that the importance and value of human assets were recognized in the early 1990s when there was a major increase in employment in firms in service, technology and other knowledge-based sectors. In the firms in these sectors, the intangible assets, especially human resources, contributed significantly to the building of shareholder value. The critical success factor for any knowledge-based company was its highly skilled and intellectual workforce.Soon after, the manufacturing industry also seemed to realize the importance of people and started perceiving its employees as strategic assets. For instance, if two manufacturing companies had similar capital and used similar technology, then it was only their employees who were the major differentiating factor. Due to the above development, the need for valuing human assets besides traditional accounting of tangible assets was increasingly experienced. From the above discussions, it is felt that, Human resource accounting provides quantitative information about the value of human asset, which helps the top management to take decisions regarding the adequacy of human resources. Hence, It is Concluded that, the Human Resources are an indispensable but often neglected element is thus to be fore grounded into the industrial area for the betterment of the economy.

INFOSYS

INTRODUCTION TO IT SECTOR

IT-BPO industry in India has today become a growth engine for the economy, contributing substantially to increases in the GDP, urban employment and exports, to achieve the vision of a young and resilient India.

While the effects of the economic crisis are expected to linger in the near term future, the Indian IT-BPO industry has displayed resilience in countering the unpredictable conditions and reiterating the viability of Indias fundamental value proposition. Consequently, India has retained its leadership position in the global sourcing market.

The Indian IT-BPO industry is estimated to achieve revenues of USD 71.7 billion in FY2009, with the IT software and services industry accounting for USD 60 billion of revenues. During this period, direct employment is expected to reach nearly 2.23 million, an addition of 226,000 employees, while indirect job creation is estimated to touch 8 million.

INFOSYS PROFILE

Infosys Technologies was started in 1981 by seven professionals with US $250. The company designs and delivers technology enabled business solutions.

Their offerings span business and technology consulting, application services, system integration, product engineering, custom software development, BPO etc.

The company has 104850 employees and a large global presence in India, China, Australia, Poland, UK, Canada and Japan.

Vision

"To be a globally respected corporation that provides best-of-breed business solutions, leveraging technology, delivered by best-in-class people."

Mission

"To achieve our objectives in an environment of fairness, honesty, and courtesy towards our clients, employees, vendors and society at large.

ORGANIZATION STRUCTURE

ACHIEVEMENTS

1. First Indian company to be listed on a US stock exchange and the first company to do a Public offering without listing 2. Ranked number 14 among the most respected companies in the world 3. Listed on the Forbes Asian Fabulous 50 for the fourth consecutive year. 4. Five time Global MAKE Winner. 5. Championed Corporate Governance in India.

VALUE SYSTEM

The value systems that underscores their commitment to these achievements are-

Customer Delight It mainly deals with giving the customer the perfect solution to his problem. Furthermore, the company tries its level best to keep hold of that customer which has now become one of the most important things in running a business or a company.

Leadership by example Infosys as accompany, from its earliest stages have always been leading in its own area of excellence. The company had a humble beginning and then grew due to its core values, vision and its mission.

Integrity and transparency The company has always integrity within itself and also with the government helping the company and India as a whole in carrying them forward in to the global market.

Fairness The company always has maintained a standard in maintaining fairness in all regards of its operation and towards its customer and the nation.

Pursuit of excellence Infosys as a company has always believed in excellence in whatever it provides. This extraordinary belief has taken to the heights at which they are present now. INITIAL GOALS They started off with one client and right from the beginning understood the concept of an offshore delivery model. Conceptually, they tried to leverage

globalization for customized software development - producing where it is most cost-effective, and selling where it is most profitable, all without being constrained by national boundaries. Infosys believed that the key to success is to ensure that it executes our engagements well every time. We have based our whole operation on a foundation of strong value systems. We were careful never to compromise on that despite many challenges. PRESENT GOALS OF INFOSYS

AREA OF GOVERNANCE

To define and implement a training module and create awareness about sustainability. Status-It was achieved by providing sustainability training for seniors

PRODUCT RESPONSIBILITY

Sustain customer satisfaction in the annual customer survey Status- It was achieved; the overall customer satisfaction was at 81 %

ENERGY

Monitor energy consumption to become energy efficient.

Status- This was achieved by implementing new monitor mechanisms Reduce per capita energy consumption by 5 %.

Status- This was partially achieved by reducing the per capita electricity consumption to 10%.

ENVIRONMENT

Plant a tree for every new employee

Status- Below the target planted 16,000 trees in Mangalore.

HUMAN RIGHTS

Create a framework for employees, suppliers and vendors to be educated on human rights.

Status- Below target- developed a basic training module on human rights which will be implemented in 2010.

EMPLOYEE ENGAGEMENT

Track impact of employee health related activities.

Status- Target achieved by receiving feedbacks after health check ups.

SOCIETY

Define and implement metrics for measurement.

Status- Achieved target by developing guidelines and dashboards.

HRA in Infosys

Q1.Explain in detail the HRA model adopted by Infosys. What benefits did the company reap after valuing its human resource? Infosys used the Lev and Schwartz method to value Human Resource According to this model the present value of future earning capacity of an employee, from the time of joining the organization till retirement was estimated. Infosys used this model based on the following assumption An employees salary package included all benefits, whether direct or otherwise, earned both in India and in a foreign Nation. The additional earnings on the basis of age group were also taken into account. The method is as follows. All the employees of Infosys were divided into five groups, based on their average age .Each groups average compensation was calculated. Infosys also calculated the compensation of each employee at retirement by using an average rate of increment. The increments were based on industry standards, and the employees performance and productivity. Finally the total compensation of each group was calculated. This value was discounted at the rate percent per annum which was the cost of capital at Infosys to arrive at the total human resources of Infosys.

Benefit experienced By Infosys by valuing its human resources.

1) Infosys could determine whether its human asset was appreciating over the years or not. This information was important for the company as its success depended solely on the knowledge of the employees. 2) The company could also use this information internally to compare the performance and productivity of employees in various departments. 3) HRA also helped Infosys to decide the compensation of employees. The company ensured that it compensated each employee according to his / her net worth. 4) HRA also helped Infosys in indentifying and retaining valuable employees. 5) It helped organization to take managerial decisions based on the availability and the necessity of human resources. 6) When human resources gets quantified it gave Infosys investors and other clients true insights into the organization and its future potential. It restored faith amongst shareholders. 7) BY adopting HRS the following information could be obtained Cost per employee Human capital investment ratio The amount of wealth created by each employee The profit created by each employee. The ratio of salary paid to the total revenue generated.

To sum up HRA in Infosys helped in identifying the right person for the right job, based on the experience, etc. persons specialized skills, knowledge, capabilities

What are the possible disadvantages of the evaluation of the human capital by organizations? Do you think its ethical on the part of an organization to place a monetary value on its employees? Explain.

Disadvantages for the evaluation of human capital. 1) Companies use various HRA models and comparing two companies using two different models was difficult. 2) Companies could also misuse HRA to enhance their image .A company could use this image to prop up its image in the investors mind, and change assumption to keep the values positive. 3) There could be a concern of the creditability of the numbers reported 4) The model was based on assumptions and was subjective. Hence figures could be totally ambiguous. 5) Some employees may be underestimated since a numeric figure did not clearly quantify what their true capabilities are. Ethical Consideration: I dont think its unethical on the part of an organization to place a monetary value on its values. In fact employees are shown as assets to an organization and valuing them would show their true worth which everyone should appreciate. If employees are considered as assets of an organization then why not show their productivity in the balance sheet. The company would be able to boost its investor confidence and it would be considered a great place to work (like Infosys)

Companies should make it clear that its the employees who define the company and it also shows a highly performance based organization. There may be a downside with respect to falsified information but on the whole I dont think its a unethical