Page 96 - DCOM409_CONTEMPORARY_ACCOUNTING

Unit 7: Approaches of HRA

The value of an object, in economic terms, is the present value of the services that it is Notes
expected to render in future. Similarly, the economic value of human resources is the
present worth of the services that they are likely to render in future.
The non-monetary methods for assessing the economic value of human resources also
measure human resources, but not in dollar or money terms.

Likert and Bowers propose causal, intervening, and end-result variables, which determine
the group’s value to an organization.

7.6 Keywords

Attitude Measurements: Attitude measurements are used to assess employees’ attitudes towards
their job, pay, working conditions, etc., in order to determine their job satisfaction and
dissatisfaction.
Causal Variables: Causal variables are those that can be controlled by the organization.
Intervening Variables: Intervening variables reflect organizational capabilities and involve
group processes, peer leadership, organization climate, and the subordinates’ satisfaction.
Performance Evaluation: Performance evaluation measures used in HRA include ratings, and
rankings. Ratings reflect a person’s performance in relation to a set of scales.

The End-result Dependent Variables: The end-result dependent variables reflect the achievements
of the organization or the total productive efficiency in terms of sales, costs, earnings, market
performance, etc.

7.7 Review Questions

1. What are the two measurements in HRA (Two Approaches)?
2. Explain the Cost Approach, the Economic Value Approach: Monetary Value Based
Approaches and the Non-Monetary Value Based Approaches.

3. Explain the concept of human resource accounting. State its importance.
4. Differentiate between the following approaches suggested for valuation of human
resources: Historical Cost Approach and Replacement Cost Approach.

5. Write a note on Human Resource Accounting in India.
6. Illustrate the recording of human assets as per the “present value of future earnings”
model.

7. For determination of the present value, a number of valuation models have been developed.
What are those models?
8. Illustrate the total cost concept with a suitable example.

9. Critically evaluate the opportunity cost approach.
10. The movement or progress of people through organizational ‘states’ or roles is called a
stochastic process. Discuss.

Answers: Self Assessment

1. Replacement cost
2. alternative

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