“Human to value, record and present the

“Human capital is described as acapitalised value of the increased flux of earnings that will move to anindividual who has been the receiver of an investment in skills or knowledge.

In other words, human capital is anasset owned by an individual. Therefore more, an individual wealth is increasedthrough the process of investment. An investment is a process by which part ofpotential output of community is shifted from current consumption to aproductive use that will increase the output of society in the future. Aninvestment normally take place in a formal educational or work environment. The process of identifying, measuringdata about human resources and communicating this information to concernedparties is called Human Resources Accounting (HRA).

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Moreover, HRA is describingas a qualification of human organisational contribution such as training,experience or ability to communicate effectively.  It is an application of creative skill tovalue, record and present the human resources capital in reports of abusiness.  The objective of HRA is to identifyvalue of human resources, calculation of the cost and value of people tobusiness organisation and exploration of the cognitive and behavioural impactof this information.  Management of human resources isessential in respect to accounting professionals. Valuation, recording of humanresources in accounts as well as honest disclose of this information infinancial statement, are demand of shareholders.

To improve managerialperformance and employee’s efficiency. Investment in developing human resourcesis no revenue expenditure. Its impact on increasing the abilities of employeesdelivers benefit for a long term.  Theoretically, human capital cost ismore important than the expensing method. Data relating to human assets is morevaluable for internal as well external users when making different decision. Many businesses, which requirenotable creativity or they are science based demonstrate a considerabledifference between market value and net book value. This difference is forintangible assets, including human skills.

Nevertheless, the human resources arenot recognise in Balance Sheet report. The human capital is not properlyaccount in businesses book of accounts. Auditor are concerned about the fact that the balance sheet report isshowing true position of the business but not recognise the value of Human Resources.Therefore, the main problem of HRA is recognition time and procedure ofrecognising human capital. However, some of researches haveproposed a model, which is an extension to Lev and Schwartz Model (L),which was developed in 1971 for valuing human resources.

The model uses avaluation principles of L but in the same time removes major weakness ofL model such as it is able to account for Human Resources in the balancesheet report.


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