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GROUP MEMBERS
NAME
PATEL SAPNA M.
VANKAR JIGNASA V.
PATEL MANSI H.
CHALKE NAMRATA V.

R.N.
22
23
24
25

INTRODUCTION OF HRA

Process of identifying and measuring data about

human resources and communicating this
information to interested parties.

Quantification of the economic value of the

people in an organization.

Cont...

Measurement and reporting of the cost and

value of people in organizational resources.

Art of valuing , recording and presenting

systematically the worth of human resources
in the books of accounting of an organization.

DEFINATION

HRA the systematic recording of the

transactions relating to the value of human
resources.

According to American Accounting

Association , HRA is a process of identifying
and measuring data about human resources
and communicating this information to
interested parties.

OBJECTIVES

Improve management by analyzing investment in

HR.

Considers peoples as its asset.

Attract and retain qualified people.

To have an analysis of the human asset.

Cont...

To aid in the development of management

principles and proper decision making for the
future and helps to determine financial
consequences of various practices.

It provides a sound and effective basis of human

assets control , that is , whether the asset is
appreciated depleted or conserved

ADVANTAGES

To helps management in planning and

executing personnel policy.

To helps identification of training needs.

Facilitating allocation, conservation and

reward of human resources.

To helps in improving the efficiency of

employees.

HUMAN RESOURCE
ACCOUNTING MODELS
H.R.
H.R. cost
cost
accounting
accounting

H.R.
H.R. Value
Value
accounting
accounting

Historical
Historical
methods
methods

Hermansons
Hermansons model
model

Replacement
Replacement
cost
cost methods
methods

Lev
Lev and
and schwartz
schwartz model
model

Opportunity
Opportunity cost
cost
methods
methods

Stochastic
Stochastic rewards
rewards
valuation
valuation model
model

Jaggi
Jaggi and
and lau
lau model
model

HISTORICAL COST
METHOD

This approach was first initiated by RINSES LIKERT.

This model involves capitalisation of the actual cost

incurred on recruiting , selecting , hiring , training
and developing the human resource of the
organization.

Cont...

The sum of such cost represents the value of the

human resources of the organization.

This value is amortised over the expected length

of service of individual employees.

The unexpired cost is considered to be the

investment in human resources.

Cont...

If an employees leaves the organization due to

resignation , death , dismissal etc. Whole of the
amount not written off is charged to the current
revenue.

This method is simple and meets the test of

traditional principle of accounting.

E.g. matching of cost with revenue.

Replacement cost model

This method of valuation of human resources was

developed by Eric G. Replacement cost refers to
the sacrifice would have to be incurred today to
replace human resources presently employed.

This method is based on current value or

replacement cost.

Cont...

Under this system, an organization values an

employee at the estimated cost of replacement
with a new employee of a equivalent ability.

There is two different concepts of replacement

cost viz., individual replacement cost and
positional replacement cost.

A) INDIVIDUAL REPLACEMENT
COST

The replacement cost of individual in an

organization as conceptualised by flamholty
comprises of:

The present estimated cost of hiring, training,

and developing individuals upto the normal
level of productivity of the existing individuals.

B) Positional replacement
cost

Besides the assessment of

replacement cost of individuals , such as
cost item may be estimated with reference
to different positions in an organization
rather than specific individuals to be
referred to as positional replacement cost.

OPPORTUNITY COST
MODEL

This model was developed by HEKIMIAN and

JONES.

This model is based on the fact every human

asset has value only when it is scarce.

The investment centre with the highest bid would

win the human resource and include the price in
its investment base.

This model is also known as competitive bidding.

Cont...

Suitable for scarce employees only

All managers will be encourage to bid

Concept of opportunity cost is applied by

establishing an internal labour market within an
organisation through the process of competitive
bidding.

HRA MODELS AND HUMAN

RESOURCE DEVELOPMENT

The usefulness of a HRA model in the process of

HRD would depend upon how best it meets
certain basic requirements which are;

The model should identify the factors which

determine and improve the value of human
resources.

Cont...

The model should be capable of measuring the

value of human resources operationally.

The information generated by the model should

help users to make decisions relating to the
process of human resource development.

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