MEANING OF HUMAN RESOURCE ACCOUNTING
Human Resource Accounting is the measurement and reporting of the costs incurred to recruit, hire, train and develop employees and their present value to the organization. HRA'S basic purpose is to facilitate the effective and efficient management of human resources, keeping the cost factor in view
LIMITATIONS OR DISADVANTAGES OF HUMAN RESOURCE ACCOUNTING
The following are the limitations of Human Resource Accounting:
1. No specific and standard guidelines for the 'cost' and 'value' of human resources have yet been developed and hence existing valuing systems suffer from many drawbacks.
2. Since the life of human resources is uncertain, it is impractical to value this asset in certain and real terms.
3. In the long run, HRA may prove to be discriminatory because an employee adjudged to have lesser value might be discouraged.
4. Unlike other physical assets, the human asset cannot be owned, retained and utilized at the discretion of the organization, as such to treat them as assets, would not be appropriate.
5. Trade unions generally oppose the concept of human resource accounting. Moreover, an employee, assessed at higher value may demand more rewards/ compensation on account of his high value.
6. There is no consensus on the form and manner, on the basis of which human assets may be reflected in the financial statements of the organization.
7. Even if a valuation is awarded to the human asset, its amortisation is hypothetical because the determination of the rate of amortisation is not easy to work out. Should the rate of amortisation be decreasing, constant or increasing and what should be the basis of the rate of amortisation for different categories of employees.
RELATED TOPIC
Characteristics of Human Resource Management
Objective of Human Resource Management
Scope of Human Resource Management
