Page 123 - DCOM409_CONTEMPORARY_ACCOUNTING

Contemporary Accounting

Notes Self Assessment

Fill in the blanks:
11. …………….denotes of voluntary ethical code of business and management of companies.
12. Corporate Governance deals with terms, procedure, practices and implicit rules that
determine a company’s ability to take …………to maximize long term shareholders value
and also to take care of all other shareholders in the enterprise.

9.5 Human Resource Accounting

The past few decades have witnessed a global transition from manufacturing to service-based
economies. The fundamental difference between the two lies in the very nature of their assets. In
the former, physical assets like plant, machinery, material, etc., are of utmost importance. In
contrast, in the latter, knowledge and attitudes of the employees assume greater significance.
For instance, in the case of an IT firm, the value of its physical assets is negligible when compared
with the value of the knowledge and skills of its personnel. Similarly, in hospitals, academic
institutions, consulting firms etc., the total worth of the organisation depends mainly on the
skills of its employees and the services they render. Therefore, the success of these organizations
is contingent on the quality of their human resource – their knowledge, skills, competence,
motivation and understanding of the organisational culture.
In knowledge-driven economies therefore, it is imperative that the humans be recognised as an
integral part of the total worth of an organisation. However, in order to estimate and project the
worth of human capital, it is necessary that some method of quantifying the worth of the
knowledge, motivation, skills, and contribution of the human element as well as that of the
organisational processes, like recruitment, selection, training, etc., which are used to build and
support these human aspects, is developed. Human Resource Accounting (HRA) denotes just
this process of quantification/measurement of human resources.

Task Identify the key differences between human resource accounting and cost
accounting.

Self Assessment

Fill in the blanks:
13. The past few decades have witnessed a global transition from manufacturing to
…………………economies.
14. ………………….denotes just this process of quantification/measurement of human
resources.

15. In ……………..economies it is imperative that the humans be recognised as an integral
part of the total worth of an organisation.

9.6 Summary

Recent developments in corporate financial reporting indicate a greater emphasis on
better voluntary disclosures by the companies regarding their performance and state of
affairs.

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