Human Asset Accounting: Where Are We Today?

The theory of human asset accounting first became an issue in the 1960s. The concept has met with little acceptance due to the feeling that it has little to offer in a practical sense. There are limitations to its use outside an organisation, but its real benefit is internally with the decision‐making process. It has been broadly defined by the American Accounting Association as “the process of identifying and measuring data about human resources and communicating this information to interested parties”. This implies that human resources or assets should be capitalised on the financial statements. Traditionally, the costs of all human resources are added up and charged against the income of the period in which they were incurred. The reason for capitalising these or some of these costs is because there could be benefits derived from these costs in future periods. This method of “expensing” these costs, which include recruitment, selection, and training and development of employees, for example, goes against the principle of matching costs and benefits together in the same accounting period.