AN ASSESSMENT OF HUMAN ASSET ACCOUNTING TECHNIQUES AND ITS APPLICATION TO NIGERIA PRIVATE SECTOR

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AN ASSESSMENT OF HUMAN ASSET ACCOUNTING TECHNIQUES AND ITS APPLICATION TO NIGERIA PRIVATE SECTOR

ABSTRACT

The most important asset in the knowledge economy is the Human asset. It is an economy where a large amount of the value of the company resides in the heads of the employees instead of the tangible assets of the company. This realization made us to undertake a study of evaluating the present human accounting techniques. It is an attempt to study what is available along with what ought to be. We found out that most Human asset accounting has been around since 1960s. And its perceived weakness centered mainly on the clash with generally accepted accounting principles. There is also the problem of coming up with a model of valuing Human asset acceptable to all. These are the drawbacks in the practical application Human asset. We discovered that there are various methods of valuing Human assets that can be classified into three namely: Historical cost approach, opportunity cost and discounted present value method. We also found out that compliance with human asset accounting will assist users of financial statement especially investors and employees. We discovered that it is not the absolute value of human asset that is critical, but more its significance as an indicator of the importance that management should pay to it. There is a growing consensus that employees have moved from being a cost to becoming a resource and today they are considered to be an asset or a capital. Our recommendation is that Lev and Schwartz method of accounting for Human asset with some modification should be used because of it simplicity and appeal for acceptability. Therefore, to compute the value of human capital, multiply the number of employee by their salaries; multiplied by the average length of tenure for employee; multiplied by average increase in wages per year; all discounted back to year one. The resulting figure represents the human asset value for the firm. We also recommend that for convenience sake, the following organisations can readily apply it, namely sport clubs, management consultancy firm, Accounting firms and Banks. Human asset accounting information in our opinion should be included in our present financial statement as an additional statement unaudited as presently being practiced by twelve Indian companies

AN ASSESSMENT OF HUMAN ASSET ACCOUNTING TECHNIQUES AND ITS APPLICATION TO NIGERIA PRIVATE SECTOR

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