1. Human Resource AccountingBy
CA. Pramod Prabhu. S.H.,
B.Sc, P.G.D.B.A., A.C.A, C.I.S.A (U.S.A)

2. HRA - Meaning
Can be defined as the process of accounting which identifies, quantifies & measures human resources for the use of management to cope up with the changes in its quantum & quality so that equilibrium could be achieved in between the required resources & the provided HR
Thus, basically it is an information system that tells the management the changes taking place over time to the HR in the organisation. it also involves measuring the cost & value of the people in the organisation
Some Indian PSUs using HRA:
BHEL, SAIL, ONGC, NTPC , Hindustan shipyard etc.

3. HRA – Basic Premise People are valuable resources of an organisation
Usefulness of manpower is determined by the manner in which they are managed
Info on investment & value of HR is useful for decision making for an enterprise

4. HRA – Objectives Provide info about earning potential of employees
Provide comparative info on costs & benefits associated with investment in human assets
Measure efficiency of employee by finding productivity & profitability
Assist management in taking decisions on investment in human resources

5. HRA – Importance
Helps understand & assess inner strength of an organisation & helps management to steer the company through trying situations
Helps management in proper utilisation of HR
Helps employees in improving their performance & bargaining power, as they can assess their contribution against expense incurred on them
Helps decide on transfers, promotion, training & retrenchment of HR
Provides valuable info for persons interested in making LT investments in the firm
Provides a basis for planning of HR
Helps locate the real cause for low ROI, like improper/under utilisation of physical/human assets
Helps identify causes for high labour TO at various levels & take remedial measures
Assists evaluate training expenses against corresponding benefits obtained

6. HRA Models
Historical cost method of valuation – Valuing at costs already incurred
Replacement cost method
Standard cost method
Opportunity cost method
NPV method:
a. Lev & Schwartz model
b. Morse model (Net benefit model)
c. Hermanson’s model
d. Flamholtz’s rewards valuation model
e. Pekin ogan model
f. Jaggi & Lau model

7. HRA - Objections
There is a difference between Hr & other assets. HR cannot be valued like other assets
The different methods of valuation of HR vary & give varying results
Tax laws do not recognise HR asset. it remains only a theoretical concept
Factors for HR valuation are abstract & are not precisely measurable in monetary terms
Uncertainty about continuance of employees
Lack of perfect knowledge about future earnings of HR

8. THANK YOU