IMPLICATIONS OF HUMAN RESOURCE ACCOUNTING ON HUMAN CAPITAL MEASUREMENT IN FINANCIAL REPORTS

Human capital creates value by coordinating and managing other capitals to achieve corporate goals. Although intangible, the human factor gives life to entities, creates harmonious environment for improved efficiency, effectiveness and economy in the use of corporate resources. Its usefulness to internal productivity and external goodwill are acknowledged in the literature. Its quality, expertise, experience, character and integrity are attributes sought after by providers of financial and other capitals. Economic benefits flow to the entity from human capital. However, in corporate financial reports, human capital is not an element of the Statement of Financial Position or Balance Statement. Since financial values are not assigned to human resource like other assets, investment in and reward to human capital, which enhance its output, are expensed at the Income Statement level. This practice diminishes its status as the most critical resource of the organization as board chairmen often declare at annual general meetings. Using secondary data, this study supports the findings of previous research works that the assignment of financial values and reflection of human resource in balance sheet, will raise shareholders? wealth and eliminate hidden values in financial reports. Since human capital satisfies the criteria of identifiability and control by an entity set by IAS 38 for Intangible Assets, this study recommends that standard setters and policy makers should commence the process that will lead to the recognition of human capital in balance sheet.