Human Resource Accounting- Tool for measuring Human resource value

The past few decades have witnessed a global rebirth from manufacturing toservice based economies. The fundamental difference between the two lies in the verynature of their assets. In the former, the physical assets like plant, machinery, materialetc. are of utmost importance. In contrast, in the latter, knowledge and attitudes of theemployees assume greater significance. For instance, in the fictional character of an IT firm, thevalue of its physical assets is negligible when compared with the value of theknowledge and skills of its personnel. Similarly, in hospitals, academic institutions,consulting firms etc., the thorough deserving of the organisation depends mainly on the skillsof its employees and the services they render. Hence, the supremacy of theseorganizations is contingent on the quality of their mankind imaging- its knowledge,skills, competence, motivation and ground of the organisational culture. Inknowledge ?driven economies therefore, it is imperative that the graciouss be recognisedas an integral disassociate of the total worth of an organisation. However, in parliamentary procedure to estimateand project the worth of the human capital, it is necessary that some method ofquantifying the worth of the knowledge, motivation, skills, and function of thehuman element as well as that of the organisational processes, like recruitment,selection, learn etc., which are used to build and support these human aspects, isdeveloped. homophile resource accounting (HRA) denotes just this process ofquantification/measurement of the Human Resource.

2 4Intellectual CapitalAccounting 18.2 WHAT IS HRA?



The American Accounting Association?s commissioning on Human Resource Accounting(1973) has defined Human Resource Accounting as ?the process of identifying andmeasuring data about human resources and communicating this information tointerested parties?. HRA, thus, not only involves measurement of each the costs/investments associated with the recruitment, placement, training and development ofemployees, but also the quantification of the stinting value of the people in anorganisation.

Flamholtz (1971) too has offered a equal definition for HRA. They define...

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