CHAPTER ONE: Introduction
1.1 Background to the study
Business organizations now spend enormous sums of money and
spare no effort in selecting, training, re-training and developing their
managers to equip them adequately to meet the challenging tasks arising from
internal and international developments. The increasing technical complexity of
modern business and the time required for personnel to gain skills, and
experience and judgement in many vital areas makes brain power the critical
resource in our economy.
Financial analysis stresses the quality of management behind
the business more than any other factor in evaluating diversification and takes
over propositions. All these arise from the increasing recognition that human
resources are the most important business assets. We recognize that people are
valuable to business enterprises, universities, hospitals and perhaps, all
organizations. We know that the value of human resources is derived from their
ability to render services which have economic value.
Human Resource Accounting (HRA) provides useful information
to both internal and external users of accounting information. It helps
internal users (like management) in making decision on employment and
utilization of human resources and also in deciding transfers, promotion,
training and retrenchment of human resources. It provides a basis for the
planning of physical assets vis a vis human resources, as well in evaluating
the expenditure incurred for imparting further education, training and
development in employees in terms of the benefits derived by the firm, among
others. For external users (such as potential investors), HRA provides useful
information for making investment decisions.
Mayo (2006) posits that people are often spoken of as
assets, but are generally treated as cost because there is no credible system
of valuing them.
Marshal (1961) had also said that the most valuable of
capital is that invested in human beings.
1.2 Statement of
If human capital is, in real sense, “best practice”, why is
it that some organization lack human capital resources processes yet are
successful in their purpose? Or, put another way, why doesn’t everyone adopt
human capital principle? A simple answer would be that such firms may be
successful now, but the possibility of their sustaining their success is
reduced by their failure to implement human capital concepts.
1.3 Objective of
The main objective of the study is to critically examine the
human resources accounting as a tool for measurement of human capital.
The specific objectives are:
To find out if human resources accounting serves as a useful
tool for measurement of human capital.
To determine if human capital has helped in improving organization.
To examine if human capital is the key determinant in
explaining the rise and fall of the nations as well as factor in determining
To find out if organizations make use of the human resource.