Challenges of human resource accounting (HRA) in India-An exploratory study

Human resources are the assets of an organization. Human Resource Accounting (HRA) or human resource valuation is used to quantify the investments made in human resource of an enterprise. HRA can quantify the value of an employee. It is not an easy method. This value helps the management in decision making regarding the competency of an employee. The intangible services of the employees may not be touch but it can put as an intangible asset of the organization and it can be shown in the balance sheet.

This paper focuses on human resource accounting practices of some specific Indian companies. The analysis of the HRA information disclosure in annual reports of different companies shows that very few Indian companies follow proper HRA practices and most of the companies are only having the disclosure of very few specified attributes of HRA. High attention is given on only cost part of employees and very less attention is given to the HRA attributes which is related to the measurement of employee's real value which make them asset for the company.

This paper also discusses on some methods of HRA and limitations. Some questions are arised while practicing of HRA in the organizations I.e. is HRA only for internal use in enterprises? Should HRA have a standard format for comparability purposes? Should HRA be included in traditional financial statements?

These questions are really challengeable for the Industries. This paper is an attempt to discuss the overall functions of HRA, methods of HRA, limitations of HRA and the challenges of HRA in the Indian companies.