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Human Resource Accounting
Human Resource Accounting
Human Resource Accounting
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Human Resource Accounting is a method to measure the effectiveness of personnel management activities and the use of people in an organization.
Contents
[hide]
2 Replacement Cost approach 3 Present Value of Future Earnings 4 Value to the organization 5 Expense model 6 References
[edit] Limitations
The valuation method is based on false assumption that the dollar is stable. Since the assets cannot be sold there is no independent check of valuation.
This method measures only the costs to the organization but ignores completely any measure of the value of the employee to the organization (Cascio 3).
[edit] Limitations
Substitution of replacement cost method for historical cost method does little more than update the valuation, at the expense of importing considerably more subjectivity into the measure. This method may also lead to an upwardly biased estimate because an inefficient firm may incur greater cost to replace an employee (Cascio 3-4).
where E (Vy) = expected value of a y year old persons human capital T = the persons retirement age Py (t) = probability of the person leaving the organisation I(t) = expected earnings of the person in period I r = discount rate
[edit] Limitations
The measure is an objective one because it uses widely based statistics such as census income return and mortality tables. The measure assigns more weight to averages than to the value of any specific group or individual (Cascio 4-5).
[edit] Limitations
The soundness of the valuation depends wholly on the information, judgment, and impartiality of the bidder (Cascio 5).
According to Mirvis and Mac, (1976) this model focuses on attaching dollar estimates to the behavioral outcomes produced by working in an organization. Criteria such as absenteeism, turnover, and job performance are measured using traditional organizational tools, and then costs are estimated for each criterion. For example, in costing labor turnover, dollar figures are attached to separation costs, replacement costs, and training costs.
[edit] References
Blau, Gary E. Human Resource Accounting, 1st ed. Scarsdale, N.Y.: Work in America Institute, 1978. Caplan, Edwin H. and Landekich, Stephen. Human Resource Accounting: Past, Present and Future. New York: National Association of Accountants, 1974. Cascio, Wayne F. Costing Human Resources: The Financial Impact of Behavior in Organizations, 3rd ed. Boston: PWS-Kent Pub. Co., 1991. Flamholtz, Eric. Human resource accounting : [advances in concepts, methods, and applications]. 2nd edition San Francisco : Jossey-Bass, 1985. MontiBelkaoui Janice and RiahiBelkaoui Ahmed. Human Resource Valuation: A Guide to Strategies and Techniques. Quorum Books: Westport, ConnecticutLondon, 1995. Ulf Johanson, Gunilla Eklv, Mikael Holmgren, Maria Mrtensson School of Business Stockholm University, Human Resource Costing and Accounting versus The Balanced Scorecard: A literature survey of experience with the concepts 1998 (PDF) Human resource accounting - interests and conflicts, CEDEFOP [1] Accounting for People: Taskforce and Beyond! http://alpha.hubcapdigital.com/asset/show/d/UjFQqAz7s3I.hubcap
Retrieved from "http://en.wikipedia.org/wiki/Human_resource_accounting" Categories: Accounting systems | Organizational studies and human resource management Hidden categories: Orphaned articles from April 2008 | All orphaned articles | Wikipedia articles needing copy edit from August 2010 | All articles needing copy edit
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