Human Resource Accounting: A Panacea To Quality Financial Reporting Practice
Journal Title: International Journal of Business and Management Invention - Year 2018, Vol 7, Issue 9
Abstract
Human efforts in the running of the organization have not been given proper recognition despite the management’s claim that their employees are their valuable and indispensable assets. The recognition of the expenditure on the employees as expenses rather than as intangible assets has been problematic in producing financial statements that faithfully represent the financial performance and net worth of the organization. The traditional financial reporting system recognized the expenditure on the employees as expenses that are written off in the statement of comprehensive income in terms of salaries and wages rather than recognized the expenditure as intangible asset. This study reviewed relevant literature on human resource accounting and financial reporting to shed more lights on the importance of appropriate recognition of investments on employees by the management. The review of literature indicated that due to the inappropriate recognition of human assets in the financial statements, the information in the financial statements has not been very useful to the different users of financial statements. It was also established that inappropriate recognition of human assets in the financial statements has negative effect on the statement of comprehensive income and on the statement of financial position. The study concluded that expenditures on the employees are investments and not expenses. The study recommended that the expenditure on human resources should be recognized and recorded in the statement of financial position as intangible assets and not as expenses in the statement of comprehensive income.
Authors and Affiliations
Soetan, Timothy . A. , Asein, Aig Abel, Ajibade, Temiloluwa I.
Keywords
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