A Framework for Measuring Human Assets

by M. Myers, Vincent Flowers



This article defines the components of human resources and includes dimensions not included in earlier measures of human asset. Using these dimensions as building blocks, a model for human resource accounting (HRA) has been defined. Earlier concepts of HRA were made inadequate because of their omission of some of the essential human resource ingredients. A cost approach involves measuring a firm's investment in its human organization much as it measures investments in property, plant and equipment. Just as materiel costs include purchase price, transportation and installation, people costs include recruiting, moving, training and development. These people costs may be totaled and amortization schedule established to reflect the estimated rate at which these investment will be consumed. The net effect of this approach is to use existing accounting techniques to more completely reflect a firm's net income by capitalizing and subsequently charging to expense current investments made in employees. Another cost approach carries the investment concept beyond the historical costs of acquiring, training and paying employees and includes consideration of current replacement costs.

California Management Review

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