CHALLENGES TO ACCOUNTANTS ON HUMAN RESOURCES ACCOUNTING TO FINANCIAL STATEMENT IN BUSINESS ORGANISATIONS

CHALLENGES TO ACCOUNTANTS ON HUMAN RESOURCES ACCOUNTING (HUMAN/CAPITAL) TO FINANCIAL STATEMENT IN BUSINESS ORGANISATIONS.

ABSTRACT

Human resources accounting has over the years faced, so many Challenges as some accountants can not successfully place monetary value on the employees of the company as part of the company assets. The researcher therefore tends to unveil the challenges faced by accountants in successfully accounting for human resources. Towards achieving this, the researcher used two (2) companies as the case study covering company accountants and sixteen (16) employees. The method of data collected is by both primary and secondary source. The primary source of data is oral interviews and questionnaires carefully formulated and given out to these that made up the population of study. The secondary source of data is collected through magazines, newspapers, Journalist and published accounts of the companies involved. The researcher tabulated the data collected in chapter four of this work and finally summarized, concluded and made necessary recommendation that will assist accountants to surmount the challenges in future,.

   CHAPTER ONE

1.0           INTRODUCTION

1.1   BACKGROUND OF THE STUDY

This human resources accounting has it’s focus on the monetary valuation of human capital which is available to an organization at any time. Ever since Likert (2007) came up with the idea of human asset in the conventional balance sheet of companies.

Human resources accounting remain illusory in the minds of many accountants. It is obvious fact that of all resources employed in a     business organization, the human resources accounting to a greater extent determine the success of an organization, hence the organization members constitute the most valuable of its assets.

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Ironically, this aspect of the organization is resources seem to attract the least attention and accountants have not been able to devise a system which would incorporate the huge investment made in this area in conventional financial statement. On the other hand, any amount invested in any other firm of resources usually accounted for, and carried as an asset until the usefulness of such an investment expires.

The value of an effective human organization has been recognized in a value vaque general way. Since the turn of the century countless company chairman have asserted that our employees are our valuable assets or something of that sort, until recently, such sentiments have had little effects an accounting which has traditionally treated the cost of utilizing human resources as current expenses to be aggregated with numerous other types of expenses in the profit and loss account.

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In consequence human resources costs have tended to disappear from views.

During the early 1960 however, interest in accounting of human resources became more specific due mainly to the growing recognition of the value of human beings in the organization in generation of profitability and increasing dissatisfaction among behaviourial scientist with the postulated and principles of conventional accounting.

The concept of human resources accounting was enunciated by Likert (2007) some decade age and it has attracted considerable attention among social scientists. Because of his work was the intensive expression of human resources in accounting terms.

1.2   STATEMENT OF THE PROBLEM

It is important to note that employees are the major factor in the future well being of an organization. The major problem faced by accountants in human resources accounting being that they have not placed a standard of measurement on human beings therefore, making it impossible to place monetary value on human beings which is of greater theoretical importance. Human beings therefore are not qualified as “assets”. Rented machines and others are also not shown as assets in the balance sheet but of rentage appears as expenses.

The philosophy behind the idea of accounting for human resources sound good but in despite analysis of it has proved controversial. Accounting for human resources or capital in financial statement has been Herculean task such as their scholars argued that it’s inclusion in it will violate some accounting principles. Thus, making it’s treatment problematic. Also reactions from trade unions against the system is unfavourable to any attempt to place monetary values on worth of employee in a form, it is also viewed that human resources accounting would rise in accounting cost.

  • PURPOSE OF THE STUDY

The purpose of this study is to examine the development of human resources accounting and possibility of resolving along standing dilemma of whether it is possible to incorporate the reporting monetary terms as other assets or whether human resources should be seen as assets that could not be equated to machine, buildings, furniture and fittings even though the cost, that is salaries and fringe benefits of human  resources could be easily qualified in terms of money. In this way, it provide information both to external and internal users, it is the shareholders capital lenders and employees are informal of the work of human capital in organization.

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After all, financial statements are expected to provide the entire users with quantitative information for decision making.

  • SIGNIFICANCE OF THE STUDY

The important of measuring human resources values monetary terms has been explained by Flam Holts (2009) the failure to measure and report the value of human resources to management can conceal such optional decision making in organization areas such as recruitment, promotion, transfer, retentions, retrenchment e.t.c.  it provides a better picture of the organization financial  strength since value of people in the business of disclosed.

Identification of human resources as asset will prevent labour misuse or underuse due to reckless transfer, demotions, termination, maltreatments also help in more allocation of resources and efficient use of human resources.

The system disclose value of human resources and in computation of returns or capital employed (R.O.C.E) more realistic figure is computed since all resources material and realistic unenvied are included.  This would show a better perspective of business performance.

  • RESEARCH QUESTIONS
  1. How can we account for human being?
  2. Is it good to value human beings as an asset of a company?
  3. Are human beings (or rather services rendered by them) to be valued individually or in group.
  4. Are human resources to be valued at cost value or on Monetary basis?
  5. Is it good to or are we prepared to isolate

Physiological cost and education cost and value human being as an asset of a company?

  • SCOPE OF THE STUDY

Human resources accounting is particularly important because of the role it plays in financial statement of business organization and all firms organization establishment, this study successfully carried out will go a long way in enhancing the overall value of firms. This research of this nature requires adequate finance to enable the researcher cover a wide area. As a result of economic situation presently, transportation cost is very high. The scope of this study is limited to the importance of human resources accounting in business organization using Unilever plc and PZ Nigeria as case study, so that the researcher would be able to know their reaction to this human resources accounting will be for the success of organization.

  • DEFINITION OF TERMS
  1. HUMAN RESOURCES ACCOUNTING: This has it’s focus on monetary valuation of the “human capital” which is available to an organization at any time
  2. HUMAN CAPITAL: This means providing information in monetary terms which can be included in financial statement in the same way investments in equipment machinery of plant are now included.
  3. HUMAN ASSET: This means assigning an objective and realistic monetary value to an employee’s actual worth to the business.
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