Human resource auditing as a tool of human

resource valuation: interface and emerging practices

G.S. Batra
Associate professor, Department of Business Management, Punjabi University,
Patiala, India

The human resource valua- The financial accounting system is based on decision making by external users, particu-
tion system cannot be consid- certain conventions and principles which have larly the investors, who could benefit from
ered to be a complete system evolved over a period of time as a consequence human resource audit through provision of
of accounting unless it is of social, economic, political and legal influ- information on how the human assets of the
followed by an equally compe- ences. The adherence to some of these conven- organization have increased or decreased
tent system of auditing. tions and practices limits the usefulness of during the period. The productivity of invest-
Application or use of human accounting as a tool for decision making in ment on human beings in the organization is
resource accounting, there- also evaluated in the process. Human
certain areas. One such example is that of the
fore, must also be followed by
human resources which constitute a valuable resource valuation can be defined as the
a separate HR audit to ascer-
organizational asset. However, they are not process of identifying, measuring and com-
tain whether or not the per-
reflected in financial statements. The limita- municating information about human
formance of the managers
has been true and fair in the tion of traditional accounting in this regard resources to the users of the financial state-
overall interests of the orga- has led to the development of a new field of ment to permit informed decision making.
nization they serve. The enquiry in auditing called “human resource The objectives of human resource valuation
application and usefulness of valuation”, which seeks to identify and mea- are:
human resource valuation sure data about human resources and commu- 1 develop methods of measuring human
depends on the future efforts nicates the information to management and resource cost and values;
and experiments to be made other users of accounting information. 2 monitor the effectiveness of management’s
by practising managers, Human resources is one of the five essential utilization of human asset;
accountants and academi- resources available to any organization. It is 3 develop a theory explaining the nature and
cians. It also needs support also considered to be the most significant and determinants of the value of people to
from the professional bodies valuable asset which a company possesses formal organizations – in human resource
and government. In the and on which its profitability depends, yet cast accounting which has been advocated
absence of human resource by Pyle[2], the expenses incurred in the
accountants have not given adequate atten-
valuation, the management acquisition, training the development of
tion to developing criteria to value human
may not realize the negative human resources are treated as invest-
effects of certain resources (assets) and to show these in the
balance sheet. If the accounting profession is ments and hence shown in the balance
programmes aimed at improv-
to provide meaningful information about the sheet as an asset, and periodical write-offs
ing profits in the short run.
state of affairs of a company, it must develop out of these investments are charged to the
Such programmes may result
standards to measure the value of human profit and loss account (HRVA is based on
in decreased value of human
assets due to a fall in produc- resources both for financial reporting and as the economic value organization and in
tivity levels, high labour an aid to managerial decision making[1]. this area, early work was undertaken by
turnover and low morale. Hermanson[3], Likert[4], Lev and
Audit of human resources Schwartz[5], Likert and Pyle[6] and
could help in finding out the Rationale of human resource Flamholtz[7,8]).
efficiency of every segment. valuation and auditing The human resource valuation system can-
Human resource audit could not be considered to be a complete system of
enable the appraisal of the The primary purpose of the human resource
audit is to help management plan and control accounting unless it is followed by equally
performance of various man-
the use of human resources effectively and competent system of auditing. The applica-
agers. The basic function and
efficiently. Its purpose is to improve the qual- tion or use of human resource accounting,
management of human
resources is also greatly ity of financial decisions of management on therefore, must also be followed by a separate
facilitated. Hence human the premiss that the availability of quantita- HR audit to ascertain whether or not the
resource valuation and audit performance of the managers has been true
tive data on human resources would result in
activity could be helpful in and fair in the overall interests of the organi-
widening the scope of managerial decision
improving the efficiency of zation they serve.
making by permitting consideration of a
human resources in the large set of variables or improving the basis
changing business scenario. on which these variables are currently con-
sidered. In addition to management, human
Objectives
Managerial Auditing Journal
11/8 [1996] 23–30 resource audit information is also useful to The objectives of this study are to:
© MCB University Press external parties. The purpose of the human 1 highlight the problem areas in human
[ISSN 0268-6902] resource audit is to improve the quality of resource auditing;
[ 23 ]
G.S. Batra 2 examine HRA and auditing practices in accounting (HRA) will be helpful. Human
Human resource auditing as a public sector undertakings and the models resource accounting is also a scaling tool
tool of human resource employed in valuation of HRA; that generates and reports quantitative con-
valuation: interface and 3 analyse the recent trends in valuation of trol information about the contribution of
emerging practices
human resources; human resources for promoting industrial
Managerial Auditing Journal 4 suggest a model for measuring the value of
11/8 [1996] 23–30 productivity. It can help management in
human assets of these enterprises. taking many vital decisions relating to selec-
The study is based on both primary and sec- tion, lay-off, transfers, training, promotion,
ondary data. Secondary data have been col- etc.[10].
lected from annual reports, memoranda of
association, articles of association and direc-
tors’ reports. Information has been obtained Human resource auditing
through discussion with the senior execu- Accountants in the past have not given due
tives/managers of state enterprises and those consideration to this important asset in the
having experience in management, business enterprise. In traditional accounting prac-
and accounting. Major corporate sector tices, the heavy amount incurred recruit-
enterprises like BHEL, SAIL and CCI have ment, selection, placement, training and
been selected for this study up to the period development of personnel is generally
1991-1992.
treated as a revenue expenditure and hence
it is debited from the profit and loss account
of the period during which it is incurred.
Valuation of human resources Today, however, it is argued that these
Business today is passing through a phase of expenditures, incurred by an enterprise to
transformation, i.e. of change and uncer- gain the benefit of the services of its man-
tainty. The human resource function may power force in the future, are against the
find itself progressively on the periphery in accounting principle to treat them com-
terms of its capacity to activate the people pletely as revenue.
assets of a corporation[9]. In any organiza- In fact such expenditure should be capital-
tion the most important input is the human ized and shown in the balance sheet. The
element. The success or failure of a company failure of professional accountants to treat
depends on the people who staff the organi- human resources as assets attracted the
sation. Even new capital issues may be over- attention of academics and, in the 1970s, the
subscribed if they are floated by competent concept of human resource valuation and the
persons. This is because investors in the auditing concept was evolved which empha-
capital market place high value in human sizes that human resources should be treated
ability rather than factors like net worth, as physical assets and should be shown in the
yield and price-earning ratio which are not balance sheet of the enterprise.
available in the case of a new company. Even
The primary purpose of human resource
among nations, countries like Japan, Ger-
auditing is to facilitate the management of
many and Korea are able to make rapid
people as organizational resources. It can
strides – thanks to the human resources not
also be called human resource management
in terms of numbers but in terms of quality,
auditing, i.e. the application of accounting
devotion to work and loyalty to the nation.
and auditing to the management of human
History is replete with examples of several
resources.
great personalities like Christ, Buddha, the
Likert one of the earliest proponents of the
prophet Mohammad, Sankara and
Vivekananda that makes us realize what a subject, has listed the following objectives of
single individual can achieve without mater- human resource accounting[6]:
ial resources. In business also, the greatest • to furnish cost value information for mak-
asset is the human resource of the enterprise ing management decisions about acquiring,
and not the plant, equipment or the magnifi- allocating, developing and maintaining
cent buildings it owns. human resources in order to attain cost-
However, it is unfortunate that the balance effective organizational objectives;
sheets do not exhibit this most vital asset, • to allow management personnel to monitor
while capital invested in other assets is effectively the use of human resources;
shown. This is one of the severe limitations • to provide a sound and effective basis of
of present-day financial statements which asset control, i.e. whether assets are con-
impedes the user of these statements in mak- served, depleted or appreciated;
ing full use of them. To find out the produc- • to aid in the development of management
tivity of investment in respect of human principles by classifying the financial con-
beings in any enterprise, human resource sequences of various practices.
[ 24 ]
G.S. Batra duties of auditors in relation to mandatory
Human resource auditing as a Accounting standards in India accounting standards, it has been declared by
tool of human resource The council of the Institute of Chartered the ICAI that members should examine
valuation: interface and whether accounting standards are complied
emerging practices Accountants of India (ICAI) constituted the
Accounting Standards Board (ASB) in April with in the presentation of financial state-
Managerial Auditing Journal ments covered by their audit. In the event of
11/8 [1996] 23–30 1977. The main function of the ASB is to for-
mulate accounting standards (AS). any deviation from accounting standards, it
The ICAI is one of the members of the will be the duty of auditors to make disclo-
International Accounting Standards Com- sures in their reports and draw attention to
mittee (IASC). While formulating accounting the material departure from accounting stan-
standards, the ASB gives due recognition to dards so that the users of financial statements
international accounting standards (IAS) may be aware of such deviation[12].
issued by the IASC and tries to integrate Although the ASB of the ICAI have brought
them to the greatest extent possible in the out accounting, standards on most of the
light of the prevailing conditions and prac- important areas in accounting and have
tices in India. The accounting standards are ensured their implementation by making
issued by the authority of the council of the accounting standards mandatory, the most
regrettable fact is that the ICAI has not been
ICAI. The accounting standards are applica-
able to bring any definitive accounting stan-
ble to public sector companies, private sector
dard or measurement in reporting of human
listed companies and large borrowers of
resources costs. The non-disclosure of human
funds from banks and financial institutions
resources accounting information in finan-
in the corporate sector. The accounting stan-
cial statements distorts the net income dis-
dards are intended to apply only to items
closed by the profit and loss account, total
which are material. It is the duty of the mem-
asset figure in the balance sheet and also
bers of ICAI to ensure that the accounting
computation of the rate of return on capital
standards are implemented in the presenta-
employed through its components of net
tion of financial statements covered by their
income and total assets.
audit reports. In the event of any deviation
from the standards it is also their duty to
make adequate disclosures in their reports
Human resources valuation and
so that the users of such statements may be
auditing practices
aware of such deviation. Initially the stan-
dards are recommendatory in character for a On a survey of the annual reports of public
period of three years. The ICAI gives wide enterprizes and private enterprises in India,
publicity among the users and educates we find that the chairman’s report invariably
members about the utility of accounting contains statements highlighting the the
standards[11] and the need for compliance significance of human resources. The chair-
with the disclosure requirements. man of these enterprises make their remarks
The accounting standards issued by ICAI at the annual general meeting of the share-
are on the lines of international accounting holders that employees are their most impor-
standards with requisite modifications tant assets and without their significant con-
depending on the needs of the country. All tribution the present growth of the operation
these accountingstandards are important for would not have taken place:
the measurement and disclosure of account- • I wish to place on record my sincere grati-
ing information. The ICAI is aware that the tude for the hard work done by the employ-
implementation of accounting standards is as ees of our company.
important as their formulation. The ASB • I thankfully acknowledge the contribution
constantly makes efforts to achieve an ever- made by our employees.
increasing degree of compliance with These qualitative pronouncements reflect the
accounting standards. As one of the steps in importance of human resources in an enter-
this direction, the continuing education pro- prise, but the quantitative information relat-
grammes of the ICAI attach importance to ing to their contribution or their value is not
discussing the implications of accounting recorded or shown in the financial accounts.
standards so that an awareness of their util- However, in practice a few enterprises value
ity in bringing about uniformity in account- their human resources and report this infor-
ing practices may be created. Efforts are also mation in their annual reports:
being made to enforce the standards by mak- Public sector enterprises:
ing them mandatory. Out of 11 accounting • Bharat Heavy Electricals Ltd (BHEL);
standards so far issued by the ICAI, eight • Cement Corporation of India;
accounting standards (AS1,4,5,7,8,9,10 and 11) • Project and Equipment Corporation of
have been made mandatory. As regards the India;
[ 25 ]
G.S. Batra • Engineers India Ltd (EIL); where
Human resource auditing as a • Minerals and Metals Trading Corporation E(Vy) = expected value of a person’s human
tool of human resource of India (MMTC); capital who is y years old,
valuation: interface and
• Electrical India Ltd; T = person’s retirement age,
emerging practices
• Oil and Natural Gas Commission (ONGC); Py(t) = profitability of the person leaving the
Managerial Auditing Journal
11/8 [1996] 23–30
• Hindustan Shipyard Ltd; organization,
• Steel Authority of India Ltd (SAIL); I(t) = expected earnings of the person in
• Oil India Ltd (OIL). period I,
Private sector enterprises: r = discount rate.
• Tata Engineering and Locomotive Works A glance at Table I makes its abundantly
(TELCO). clear that the majority of the organizations
• Associated Cement Company (ACC). which publish such information use the Lev
• Southern Petrochemical Industries Corpo- and Schwartz[5] model of economic value.
ration (SPIC).
The pioneer in the field is BHEL which exper-
These companies have followed the present imented with this concept in 1974-1975 and is
value of future earnings model of Lev and still using the same model. But CCI[14] and
Schwartz[5]. However, CCI and ACC men- SAIL[15] highlight in their annual reports
tioned in their annual reports that they have that they have used:
adopted models as enunciated by Lev and • the Lev and Schwartz model after incorpo-
Schwartz[5], Flamholtz[7] and Jaggi and rating “certain refinements as suggested by
Lau[13] with appropriate modifications. Lev Flamholtz[15] and Jaggi and Lau[13].
and Schwartz[5] suggested the application of • the economic models developed by Lev and
the economic concept of capital to the valua- Schwartz[5], Flamholtz[15] with appropri-
tion of human resources. According to Lev ate modifications.
and Schwartz[5] model, which is the basic
model employed by the Indian companies, the Many companies such as BHEL do not con-
value of human capital embodied in a person, sider labour as a cost but as a resource; and in
who is y years old, is the present value of his valuing this asset the Lev and Schwartz[5]
future earnings from his employment and can model is mostly adopted. In the process, they
be calculated by the following formula: take into consideration factors such as:
T t • present pattern in employee compensation
E(Vy) = ΣPy (t + 1) Σ Ii
t–y
including direct benefits incorporating the
T=Y T = Y (I + r) effect of wage revision;

Table I
Human resource accounting system: selected Indian companies
Publishing HRA Discount
Name of company information since Model rate %
Oil and Natural Gas Commission (ONGC) 1981–82 NR 11.25
Engineers India Ltd (EIL) 1980–81 NR 10.00
National Thermal Power Corp.
Ltd (NTPC) 1986–87 [5] 12.00
Minerals and Metals Trading Corp.
of India (MMTC) 1983–84 [5] 12.00
Bharat Heavy Electricals Limited (BHEL) 1974–75 [5] with refinements
as suggested by [8, 13] 14.00
Cement Corporation of India Ltd (CCI) 1980–81 [5] with refinements
as suggested by [8, 13] 15.00
Madras Refineries Ltd (MRL) 1985–86 [5] 15.00
Metallurgical and Engineering
Consultants (I) Ltd (MECON) 1984–85 [5] 14.00
Oil India Ltd (OIL) 1984–85 [5] 10.50
Associated Cement Companies
Ltd (ACC) 1983–84 [5] NR
Southern Petro-Chem Industries
Corp. (SPIC) 1983–84 [5] NR
Note: NR = not required
Source: Annual reports of companies

[ 26 ]
G.S. Batra • normal career growth as per the present • normal career growth as per the present
Human resource auditing as a policies, with vacancies filled from the policies, with vacancies filled from the level
tool of human resource levels immediately below; immediately below;
valuation: interface and • weightage to be given for changes in effi- • weightage for changes in efficiency due to
emerging practices
ciency due to age, experience and skills of age, experience and skills;
Managerial Auditing Journal the employees; • application of a discount factor of 12 per
11/8 [1996] 23–30
• a discount factor of 12 per cent per annum cent per annum on the future earnings to
on the future earnings to arrive at the pre- arrive at the present value.
sent value.
The value of total human resources
increased from 4,750 million in 1978-1979 to
Cement Corporation of India
The corporation recognizes that human 31,112 million in 1990-1991. The ratio of
resources are of vital importance and signifi- turnover to human resources was 1.01 in
cance to an enterprise and constitute a pri- 1990-1991.
mary segment of the total resources held. The The human resource value arrived at SAIL
CCI “gives utmost attention and priority to in India and is presented in Tables IV and V.
maintain the human assets in fettle”. The The total value of 1,091,229 employees of the
concern has made good progress in the man- organization as on 31 March 1991 has been
agement of human resources. “In the absence estimated at Rs. 17,940.89 crore[17].
of a clearcut, welldefined and universally The human resource value in BHEL
accepted model for evaluation of the economic increased from Rs.10350 crores in 1983-1984
worth of human assets of a company, an to Rs.31112 in 1990-1991. In spite of the reduc-
attempt has been made to assess the same, by tion in human resource physical position in
working out the present value of the antici- artisan, supporting technical and clerical
pated future earnings of the employees, taking staff, the human resource value of these
into account the present pay scales and the categories has increased substantially. The
promotion policies being followed. The com- human resource value of the managerial
putation has been based on the guidelines and cadre in BHEL is slightly above 25 per cent
principles enunciated in the economic models of its total human resource value. The three
developed by Lev and Schwartz[5], categories of manager, executives and super-
Flamholtz[16] and Jaggi and Lau[13] with visors constitute 78.13 per cent of the total
appropriate modifications found necessary. human resource in BHEL in 1988-89. The
Table II shows the progress made by the com- value of the human assets to total assets on
pany on human resources valuation. average is about 44.47 per cent in BHEL. The
percentage of turnover to human resource
Bharat Heavy Electricals Ltd value initially rose from 127.99 per cent to
BHEL recognizes that “in any organization, 211.86 per cent during this period. The mea-
the value of its employees cannot be over- sures taken by BHEL like energy conserva-
emphasized”. It has been valuing and report- tion, manpower freezing and better working
ing human assets for the past 13 years. It has capital management resulted in an increase
recorded impressive progress on this front of value of production and value added. The
(see Table III). The human assets valuation is human resource value increase is due to
carried out by basically following the Lev and wage revision, exchange variations in
Schwartz[5] model with the following respect of foreign currency loans, an
assumptions: increase in depreciation due to changes in
• present pattern in employee compensation rates, the escalation of costs both indigenous
including direct and indirect benefits and imported inputs, which all affected a
including the effect of wage revision; value added in BHEL[18].

Table II
Value of human assets in the Cement Corporation of India (Rs. millions)
1990–1991 1989–1990 1988–1989 1983–1984 1979–1980
Executives 299 268 252 157 51
Supervisors 203 176 163 106 34
Skilled workers 553 480 436 207 61
Semi-skilled workers 209 210 194 130 42
Clerical and other supporting staff 176 185 166 96 44
Unskilled workers 158 134 122 108 55
Total 1,598 1,453 1,333 804 287
Source: Annual reports of CCI

[ 27 ]
G.S. Batra Table III
Human resource auditing as a Value of human resources, Baharati Heavy Electricals Ltd
tool of human resource
valuation: interface and 1978-79 1983–1984 1988–1989 1989–1990 1990–1991
emerging practices
Executives 1,295 2,600 5,367 6,922 9,068
Managerial Auditing Journal
Supervisors 745 1,835 4,533 5,546 6,266
11/8 [1996] 23–30
Artisans 1,590 3,385 7,196 8,550 9,624
Supporting technical staff 220 570 925 1,081 1,205
Clerical and other supporting staff 335 810 1,354 1,607 1,785
Unskilled and semi-skilled staff 565 1,150 2,459 3,026 3,164
Total 31,112 26,732 21,834 10,350 4,750
Ratios of:
turnover/total resources – 1.28 0.55 0.53 0.51
value added/human resources – 0.53 0.42 0.40 0.38
value added/total resources – 0.42 0.19 0.19 0.19
turnover/human resources – – 1.20 1.09 1.01
Source: Compiled from the annual reports of Bharat Heavy Electrical Ltd

Table IV
Value of human resources, SAIL, March 1991 (in terms of numbers)
Age group
Below Over
25 25–35 35–45 45–50 50 Total
Managers – 184 2,412 1,566 1,958 6,120
Executives 694 3,139 2,991 2,365 3,952 13,141
Supervisors 983 4,760 20,718 18,300 24,572 69,333
Clerical staff 177 1,718 1,951 467 276 4,589
Skilled workers 2,128 1,189 24,522 14,111 12,190 64,810
Semi-skilled and unskilled
workers 3,194 11,910 11,824 3,723 2,585 33,236
Total 7,176 33,570 64,418 40,532 45,533 191,229
Previous year 6,445 36,323 65,603 41,500 43,152 193,223

Table V
Value of human resources, SAIL, March 1991 (in terms of rupees in crores)
Age group
Below Over
25 25–35 35–45 45–50 50 Total
Managers – 53.63 617.32 232.81 117.72 1,021.48
Executives 171.96 900.62 614.80 279.41 242.58 2,209.37
Supervisors 175.25 751.27 2,692.08 1,365.92 692.20 5,676.72
Clerical staff 30.13 263.00 209.84 29.54 8.82 541.33
Skilled workers 322.48 1,610.96 2,424.93 774.12 322.54 5,455.03
Semi-skilled and unskilled
workers 379.35 1,509.24 933.97 171.88 42.52 3,036.96
Total 1,079.17 5,088.72 7,492.94 2,853.68 1,426.38 17,940.89
Previous year 798.08 4,292.94 5,249.97 2,438.36 1,104.74 14,899.04
Source: Compiled from annual reports of SAIL

as the methods followed for adopting HRA

Problems in human resource suffer from one or the other type of difficulties.
valuation Although human capital plays an impor-
In the process of introducing human resource tant role in any organization, there is wide-
valuation and auditing, the corporate sector is spread disagreement regarding the recogni-
often confronted with the following problems tion and valuation of human resources as
[ 28 ]
G.S. Batra assets. Generally an asset is one which fulfils proportional to the changes in the payments
Human resource auditing as a the following three criteria: to employees. Under the Lev and Schwartz[5]
tool of human resource 1 the entity should have legally enforceable model the value of human resources will
valuation: interface and claim to it; more or less increase, even if the organiza-
emerging practices
2 it should be owned by the entity tion continuously incurs losses. The attitude
Managerial Auditing Journal 3 the entity should possess it with the expec- and morale of the employees, the contribu-
11/8 [1996] 23–30
tation of deriving services from it in tion of employees to the organization and
future. such other factors are out of the purview of
the Lev and Schwartz[5] model of human
However, human resources hardly fulfil these
resource valuation. Therefore, Indian compa-
criteria. As such, the efforts to recognize
nies may consider a human resource model
human resources as assets suffer a setback.
based on the employees’ contribution to the
Proper matching of costs with revenue is
organization.
not possible unless the costs of the recruit-
Eric Flamholtz[7] has advocated a model for
ment, training and development of personnel
human resource valuation based on a sto-
are capitalized over their effective services
chastic process with service rewards. A gen-
lives. This is so because the benefits from
eral statement of this model is:
such expenses are usually derived over a
E(S) = S1(PS1) + S1(PS2) + .....Sn (PSn)
period beyond the year of payment. However,
in a number of cases, the earnings potential i.e.
of employees may not depend on the expendi- n
ture incurred by the firms for this purpose. E(S) = Σ Si(P)(Si)
But it depends on behavioural aspects like i=i
skill, motivation, group loyalty, capacity for
where E(S)is the total quantity of services
effective interaction and decision making to
expected of the individual E to the organiza-
influence the end results of an enterprise
tion; Si is the quantity of services; Si(P) is the
effectively.
profitability of occurrence of Si.
All the companies have basically adopted
The above equation may be presented in the
the Lev and Schwartz[5] model for valuing
following form by incorporating the discount
their human resources. All the companies
factor for arriving at the present value.
have used different discount rates for the
n m
purpose of calculating the present value of
future earnings of employees. For example
HRV = Σ (Ri*P)/
t=i (1+r)t
ONGC uses a 12.25 per cent discount rate,
i=i
which is stated as the rate at which the Gov-
ernment of India is advancing loans to it. Where HRV is the human resource value; Ri
SAIL is using a discount rate of 14 per cent. is the value of the service position; P is the
Companies such as ONGC, SAIL, MMTC, profitability of being retained in the service
OIL, EIL and CCI, which have also reported position i; t is the time period, n represents
“social accounts” in their annual reports, the number of time periods; r is the discount
show the value of human resources both on rate; and m is the state of exit (a person may
the assets as well as the liabilities side of the reach the state of exit by death or by leaving
social balance sheet. This means that their the organization for betterment or by volun-
net value is zero. Moreover, if we consider the tary retirement while serving in the present
recruitment, training and development position or after occupying a few or all of the
expenses incurred by employees in the past, subsequent service positions the organiza-
their net value to the organization becomes tion). The basis for the above model is the
negative. value of the service position (Ri).
Although these organization have valued
their human resources and have reported
such values in their annual reports, what has Conclusion
not been mentioned is how they are treating
It may be concluded that human resource
the huge expenses incurred by them on hir-
auditing clearly encompasses such elements
ing, training and developing their employees.
as the:
Obviously they are charging such expenses
• composition of employees grades;
wholly to the profit and loss account, which is
• productivity of human resources;
against accounting principles.
• programmes for employee development;
• personnel payments to the employees and
expenses on social welfare per employee;
Suggested model • human asset valuation;
The fluctuations in the value of employees’ • human assets vis-à-vis total assets;
contributions to the organization are hardly • value of human assets in an organization.
[ 29 ]
G.S. Batra In India, human resource valuation until now 2 Pyle, W.C., “Human resource accounting”,
Human resource auditing as a has not been introduced as a system. So far as Financial Analysts Journal, September-
tool of human resource the statutory requirement is concerned, the October 1970, pp. 69-78.
valuation: interface and Companies Act, 1956, does not require the 3 Hermanson, R.H., “Accounting for human
emerging practices assets”, Occasional Paper No. 14, East Lans-
furnishing of any significant information
Managerial Auditing Journal ing Michigan Bureau of Business and Eco-
about human resources in the financial state-
11/8 [1996] 23–30 nomic Research, Michigan State University,
ments of companies. The Institute of Char-
East Lansing, MI, 1964.
tered Accountants of India, has not issued an 4 Likert, R., The Human Organization. Its Man-
accounting standard for the measurement agement and Values, McGraw-Hill, Tokyo, 1967,
and reporting of the cost and value of human pp. 146-55.
resources of a organization. Implicitly, how- 5 Lev, B. and Schwartz, A., “On the use of the
ever, the existing accounting standards, in economic concept of human capital in finan-
the absence of any negative directive, may be cial statements”, The Accounting Review,
seen to support the adoption of human January 1971, pp. 103-12.
resource accounting by an organization for 6 Likert, R. and Pyle, W.C., “Human resource
the purpose of meeting its own requirements. accounting, a human organizational measure-
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15 Annual Report, Steel Authority of India Ltd,
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scenario. of Management Studies, Vol. 11 No. 1, February
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