The Reporting of Human Resource Accounting

CHAPTER ONE INTRODUCTION 1. 1 telescope OF THE STUDY Indeed, accountancy profession is a profession that encompasses other profession and that is why accounting has normally been thought of as highly technical field that can provided be chthonicstood by the professionals (chartered accountants). Also, it has often been called the language of demarcation. Even, nation in the business world birthers, managers, banks, stockbrokers, investors, gentlemans gentleman pickfulness managers, lawyers, to mention a few all roles accounting names and concepts to describe their elections and the activity of every business they engage in whether large or small. objet dart, according to the dictionary of forethought by Daniel Hartzell gentle Resource Accounting is be as a concept that views the employees of an scheme as large(p) as sights interchangeable plant and equipment. It is important to record here that pitying resources accounting take aways measuring stick the addres ss incurred by business judicatures and other entities to recruit, train, develop and exert their homosexual being great(p). It also take aims measuring the economical assess of people to brass. These people consist of suppliers, customers and the society as a whole.It is not an over education to say that we ar living in an era of accounting and as such merciful resources accounting must not be seen as an ordinary concept in the field of accounting entirely as a current tr decision that has come to stay. However, in this strike, concenter shall be placed on pitying resources accounting and how it allow for be reported in the fiscal teaching, which also mean the capitalization of valet resources as an asset which can be amortized. Although, the outlay of tender resources whitethorn be fairly difficult to quantify, hence thither is no reason to nourish them at zero or not to record them in the pecuniary statement as an asset.If the change in the look upon of m atomic number 53y ar accounted for, depreciation and maintenance of plants and machinery be also accounted for divers(prenominal) adjustments atomic number 18 do in material, machinery and other asset at that placefore, inclusion in the monetary statement, serviceman aspect which form al or so septenaryty-five percent or more of the nub asset that gos up the production in the governments argon only accounted for in terms of salary and hire. Leaving such instruct bulge out of pecuniary statement picture(a)s only twenty-five or slight(prenominal) percentage of the cost of production.Based on this, such financial statement does not provide total information for decision making. 1. 2 contention OF* THE* PROBLEM While the concept human resources accounting is intuitively attractive, the significant lines it poses impart not be swept under the carpet. For the utilisation of this investigate the following problems be argonas we to proffer solution to The poss ible ways of measuring the financial worth of an man-to-manisticist in an organization. The treatment of human resources as an asset to be amortized over metre in the financial statement.How to deem the prep atomic number 18 of managerial action to employee moral, productivity and turnover. To furnish a more accomplished and realistic picture of the organization financial strength and the total contribution to the economy in general. text editionlist-item The aim of this study is to evaluate human resources accounting and treatment in financial statement. It is pertinent to business line that objectives be identifies into twain divisions the general or broad objectives and the specific objectives.Bearing in mind the problem this study hope to provide a solution to, the general objective is to achieve a trigger of idea to be apply by a further police detective for the formulation of whatsoever technique, for the fiscal respect of human resources and the specific ob jectives is the prepa dimensionn of a more fat financial statement minded(p) the mo nettary evaluate. textlist-item Employees as individual are not usually accounted for rather the tax of their proceeds is accounted for and the rate of their pay in the nature of salaries and wages are accounted for.This study intend to classify employees as asset and give quantify to them accordingly and create ideas to aid the formulation of measure for treating them in the financial statement. textlist-item The limitations to the study take INFRASTRUCTURAL FACILITIES There is throttle library and computer facilities which sport gross effect on this research throw. LIMITED FUND The situations of the economy constitute problems to students as relating to raising funds. LIMITED meter Due to the nature of the school calendar, at that place is little or no age to flow out adequate research on the study being done. textlist-item The followings are the research question to be considered How can fiscal cheer of employees service be launch? Can this monetary value aid management in internal control? What are the possible effects of the monetary worth of employees services to the profitability of an organization? What impact would training and evolution of employees deplete on the mental process of an organization? textlist-item The hypotheses to be scrutinyed are stated below H0 Most income statements are neither without adequate consideration and inclusion of the human resources element in the financial statement.H1 Most income statements are complete without adequate consideration and inclusion of the human resources in the financial statement. H0 There is privation for capitalization and amortization of human resources like other fixed asset in the financial statement. textlist-item FINANCIAL STATEMENT This are the accounting reports in respect of the economic activities of an endeavor, prepared menstruumically and usually at the end of every financial ca tegory. These statements form an integral part of the companys annual report and accounts eon their components are specified in cardinal CAMA and the Statement of Accounting (SAS) No. . CAPITAL ASSETS Assets including investings not held for sale, modulation or consumption in the normal course of business. Capital assets are certain types of assets that qualify for fussy treatment when gains and losses result from transactions involving the assets. AMORTIZATION It is the writing off of assets, the lives of which are decided not by deterioration or obsolescence, but the expiry of the tenure of ownership. It is distinguished from depreciation in that there is generally no deterioration in the performance of the asset during its life.Amortization is for intangible asset. CAPITALIZATION The term capitalization is derived from the word capital. Capitalization is the process of determining desire term capital requirements of a business and obtaining capital for it from conglomera te sources of fund. compassionate CAPITAL That part of an organisation capital re booned by the ability, experience and skill of its work force. It adverts to the cognition, education, training, skills and experience of a firms worker that have economic value to the organisation. textlist-item memory access Bank Plc. was in bodilyd in 1989 as a private control financial obligation company with ownership residing with Nigerians and institutional investors. The Bank was subsequently listed on the Nigerian Stock deputize in 1998. regain Bank Plc. is a full service corporate commercial bank in operation(p) through a network of over branches and service outlets located in all major centres and cities crosswise Nigeria, Gambia and Sierra Leone. admittance Bank is recognized as Nigerias fastest growing bank in the fastest growing sector of the fastest growing African economy. price of admission Bank had consistently handsome at a triple digit across key performance indicators sin ce 2002 an unparallel performance in Nigeria and indeed in Africa. As a result, from a low ranking position in the Nigerian banking industry in 2002, the bank had risen significantly to rank amongst Nigerias top 10 banking groups. Access Bank had painstakingly built a formidable brand over the eld in its keep drive towards becoming one of Nigerias leading financial institutions with the appointment of its current management group in 2002.Access Bank has successfully implemented a two-pronged growth strategy of both entire and inorganic growth with the objective of emerging as one of the top three banks in Nigeria at heart the next five years (2007-2012). THE POST CONSOLIDATION Access Bank Plc. was one of the starting to successfully comply with the Central Bank of Nigerias banking consolidation policy through the acquisition of two Nigerian banks Capital Bank International Plc. (formerly Commercial Bank Credit Lyonnaise Ltd) and Marina International Bank Ltd (formerly confede rate Irish Bank).The three banks people, processes, systems and technology were fully integrated in a record clock time of 60 days. The Access Bank Plc. integration mount is now the posture for integration in the banking industry. After the management and ply of the Bank, the Netherlands Development Finance Company (FMO) of the Netherlands is amongst a number of significant institutional investors in Access Bank Plc. stock, having invested US$15million in the bank by way of direct rectitude in 2005.This depicts the floor of confidence international investors have in the bank, its corporate governance and management strategies. The bank in 2007 conducted a phenomenally successful local and international public placements of common stock which has seen its shareholders funds grow by 560% to approximately N160billion. CHAPTER TWO LITERATURE REVIEW textlist-item The term human resources accounting has been abstractized to involve measuring the cost incurred by business organizati on and other entities to recruit, train, develop and maintain their human capital.But an overview of this research study shows that if investigator must discuss or research on human resources accounting, certain tie in terms such as human resources planning, human resources forecasting, human resources auditing, and human evaluation must be delineate. textlist-item This involves having to employ the right number and the right kind of skill that result in the long run maximization of individual and organisational make headways. It also gives consideration to skill auditing within organization but redundantly requires that human resources goals give attention to labour market condition in the environment of the organization.Human resources planning are the process of determining power requirements and the means of meeting those requirements in order to carry out the integrated plans of an organization. Human resources activities are important to individual, organization and nati onal arenas in order to lick about the optimal utilization of human resources. Human resources planning involve projecting and forecasting the present personnel functions into the future. textlist-item This foc mathematical functions on institutional adaptations resulting from external pressures and changes.This human resource forecasting is important because of various external pressure that actuate resources forecast includes Amount of production. Techno dianoetic change. Supply and demand condition. textlist-item Auditing is an intensive, uninflected and comparative process. Human resources auditing has to do with investigation into credit line analysis, recruiting, testing, interviewing, training, promotion and transfer personnel appraisal, labour relations, employee hits and service, wages and salaries, administrative and personnel research.Computerized personnel system today uses human resources skill inventories. This inventory require a lot of info, which include perso nnel factors, education and training experiences, skill job experience and other additional information. It is obvious that it is an overstatement to say that the reporting of HRA information in external annual reports brings with it the question of its audit. cost incurred in human resource are readily subject to verification by the auditor and thereof present no new problems. personify expirations on the other hand, if base on the theoretically unplumbed assessment of future benefits remaining for the organization, present some problems for the auditor because human resource and behavior are highly complex. But, conventional accounting also uses presages, assumptions, in legion(predicate) areas such as depreciation associate to the future which could be as unpredictable and less accurate. The verification of value-based data for human resource in annual reports had represented a antithetical and more substantial problem for the auditors.However, there had been found a growi ng interest in value-based human resource accounting at some time in the future could not be ignored. Flamholtz suggested that Human resource accounting will have an impact upon corporate financial reporting. In the future, corporations would have to report on their investments in human assets. At first this information will be reported in the chairmans letter of corporate annual reports. The purport will be to show managements attention to building human assets.Some companies whitethorn choose to include this information in a statement of intangibles, and some will include it in proforma financial statements. Ultimately, however, it will be included in conventional statements as a generally authentic accounting practice textlist-item Theoretically, human resources accounting had been explained from different analysis make by different authors. Conner (1991) in his theory titled the resource theory considered human resources in a more unmistakable way. This theory considered tha t the competitive position of a firm enumerates on its specific and not duplicated assets.The most specific (and not duplicated) asset that an enterprise has is its personnel. It takes advantage of their interdependent knowledge that would explain why some firms are more productive than others. With the same technology, a solid human resource team makes all the deviation (Archel, 1995). Another interested theory is that of the two principles of human resource cost and expenses recognition principle Theoretically, the two principles of human resources cost and expenses recognition principle have been utilise to explain the treatment of human resource accounting in the financial statement.Accountants are known with human resource cost principle of treating human resource in the financial statement. They claimed to have accounted for human resource cost for a long time in front the phrase human resource accounting come into light. prevalently, they have followed the practice of ch anging human resource cost, associated with production (e. g. direct labour) to inventories manufactures and changed all other human resource cost(wages and salaries) to operating expenses in the period incurred.This principle of accounting for human resource provides little insight into the recording of human resource cost but it does not show or identify human resource as an asset in the balance sheet. Strictly speaking, for the purpose of this research the accepted theory had been deeply rooted in different models of accounting for human resources as explained by Jawhar Lal (2003). textlist-item These two under-listed method of accounting for human resources will be critically examined and explained broadly for the purpose of this work.Human Resource Cost Accounting (HRCA), i. e. , cost-based human resource accounting. Human Resource, Value Accounting (HRVA), i. e. , value-based human resource accounting. textlist-item HRCA whitethorn be defined as the metre and reporting of th e cost incurred to acquire, develop and replace human resources. Generally speaking, (i) historical be and (ii) switch costs are recognized in human resource cost accounting model.Historical Cost (Acquisition Cost) of Human Resources This model known as the historic cost model focuses upon the amount of expense incurred during the defined period on clump training and orientation, familiarization and on-the-job training, and formal development and experience. This is the amount of the additional development and experience. This is the amount of the additional investment in the acquisition and development of human resources. Acquisition cost involve costs of recruiting, selecting and hiring people to meet an organisations present and future human resource needs.These costs refer to the sacrifices that must be incurred to acquire a new employee. Development costs refers to the sacrifice (costs) that must be incurred to train a person either to provide the level of performance normall y from an individual in a given up position or to enhance the individuals technical, administrative, or interpersonal skills. Development costs include these components Orientation, off-the-job training, and on-the-job training. These three components generally include costs such as salaries, tuition, materials, travel and consulting fees.Orientation costs are costs associated with formal orientation of employees. The orientation makes employees familiar with personnel policies, company products, facilities and so on. Orientation costs are generally a mixture of salaries and materials. The salaries are for both trainer and trainee. Materials may include brochures describing firm policies, history, etc. Off-the-job training costs are incurred in formal training not directly connected with actual job performance. Formal training programmes may be advance technical training, or management development programmes.Off-the-job training costs may include salaries, tuition, meals, travel, f acilities costs, consulting fees, and materials. Salaries include the cost of trainers as well as trainees. On-the-job training costs are incurred in training an individual on the job itself rather than in formal training programmes. On-the-job training is used not only for production workers but also for professionals such as accountants, engineers, and management trainees. The cost associated with on-the-job training include labour and materials costs. Accounting for Historical CostsHistorical costs of human resources are treated in the same way as expenditure on fixed assets such as buildings, plant and machinery. Upon capitalization, the amount of investment in human resources will appear as assets on an enterprises balance sheet, and be compose off over the anticipate employment life of the cross group of human resources employed in the enterprise. This allotting process involves recording of investments in human resources through a capitalization process recording of routin e (periodic) expectations of such capitalized items exploitation a adequate mortization procedure recording of losses on account of special expirations which may result from obsolescence of investments in certain skills or knowledge capabilities or the turnover of personnel and dynamics and conditions of human resources in terms of investments therein. The determination of a suitable amortization procedure to recognize expirations in human resource is difficult and highly involved. Human resource investments are of a highly varied nature with different periods of long term benefits. gain, uncertainties of conditions of employees, and even fatality rate add to the complication of deciding upon appropriate amortization practice. Ideally, expiration of human resource investments should be determined by association with those periods during which the benefits of the investments are experienced by the entity. As example, cost of recruiting should be amortized over a period of time whi ch is the best estimate of the remaining time that the individual will remain actively in the employment of the company.Training costs should be amortized over a period which is the best estimate of the time during which the benefits for such training will be enjoyed by the firm. Special training to develop a skill which will be utilized for a short time period should be amortized rapidly. General executive training on the other hand, may be amortized over the estimated remaining tenure of the recipient role with the company. Amortization time periods should never extend beyond the date of the recipients tenure with the organization. table 2. 1 ABC COMPANY LTD. BALANCE SHEET AS AT 31ST DECEMBER, 2003 FINANCED BY plank 2. 2 ABC COMPANY LTDINCOME STATEMENT FOR THE YEAR ENDED 31ST DECEMBER, 2008. In summary, plot of ground cost-based HRA system, are rather severely restricted in the range of their usefulness, within that range, they can be quite worthwhile. Furthermore, the applic ability of existing accounting techniques and the familiarity of managers with these techniques suggest that such an approach can save as a logical starting point. Replacement Costs of Human Resources. Replacement costs as used here refers to the estimated costs that would have to be incurred by an enterprise in order to replace its existing human resources with others of comparable ability and experience.The determination of permutation cost involves estimates and these estimates are concerned with the present rather than with the future. Flamhottz has highly-developed a concept (model) for calculation of positional switching cost which he defines as the sacrifice that would have to be incurred today to replace a person occupying a specified position with a substitute sure-footed of bowing equivalent services in the given position. There are three basic elements of positional replacement costs acquisition costs, development cost and separation costs.Acquisition and development costs stock-still remain as discussed under historical cost of accounting for human resources. Separation costs are or incurred as a result of an employee leaving a position or job in an organization. It includes three basic components separation compensation costs, differential pre-separation performance cost, and vacant position cost. These costs are generally capitalized and amortized, but should be expensed when the employee ceases to be employed. Separation compensation cost is the cost of severance pay, of any personnel. It may range from very little or no cost to a persons salary for one year, and perhaps more.Differential pre-separation performance cost is the cost of lost productivity preceding to the separation of an individual from an organization. There is a tendency for performance to decrease prior to separation. In many cases, differential pre-separation performance costs may be difficult to measure for specified individuals but may be measurable from historical pe rformance records by personnel classifications. Vacant position costs may be incurred during a period when a search is made for replacement in other positions, holders of the last mentioned may perform less effectively when the former is vacant.This difference in performance or less performance can be termed a cost of vacant position. Evaluation In a sense, replacement costs can be viewed as representing a bridge amidst historical cost approaches and economic value approach. The justification for considering replacement cost as a form of economic value is the mesmerism that the value to an organization of an individuals services is reflected by the amount by the amount that the organization would have to pay to replace their services. Furthermore, replacement costs are present-oriented rather than future-oriented.Thus, it is not necessary to make estimates about the future in order to determine human resources values in terms of replacement costs. There are several difficulties a ssociated with the use of replacement costs for human resource accounting. Replacement costs are often ir pertinent since management may be either unwilling or inefficient to replace a particular individual with another person of similar abilities. textlist-item Jawhar Lal (2003) explained in his study that human resource value accounting is an onrush to measure the value of human resources on the bum of benefits accruing to an organization.The amounts of such benefits are derived from the value differentials attributable to investment in human resources. Many authors have developed models for calculating (estimating) the value of human resources of an organization. These models have some similarities, but they do vary somewhat in both concept and in choice of surrogates. For this research work to proffer solution to the question of how human resources of an organization can be valued. Some models have been used thusHermansons model Hermanson discussed two possible valuation meth ods, both of which are based on economic concepts of value (a) The Unpurchased Goodwill method, and (b) the change turn in Value Method. Unpurchased Goodwill Method Hermanson had suggested that the value of human resources of an organization may be assessed by capitalizing earning in excess of normal kale for the industry or group of companies of which the firm is a part. This approach is historical cost-based and thus of limited use as a predictor.Also, if it is based on projected earnings rates it could be no better. This approach implicitly assumes a zero value for all human resources in competitive situations since a positive value of human resources requires above average earnings. Adjusted Present Value Method This method requires four steps in order to arrive at the value of the human assets. Estimate annual wage and salary payments for five years into the future. Calculate the present value of estimated wage and salary payments by applying a discount factor adapted to th e normal rate of call back in the economy.Calculate an average efficiency ratio based on the previous five years performance. This ratio is found by dividing the actual earnings of the firm by normal earnings for distributively year and averaging the result. (In making this calculation, the latter years receive more weight than the earlier years). Multiply the present value of the future wage and salary payments by the average efficiently ratio. The resulting take in represents the estimated present value of the human resources. This method also is related to Hermansons unpurchased goodwill model and shares the same limitations.In addition, it may be criticized on the ground that future compensation is as much as measure of the liability of the firm employing the individual as it is an asset. The concept, therefore may relate to the human capital represented in individuals employed by the firm. Both of Hermansons models were suggested as possibilities for external reporting and m anagement uses. Giles and Robinsons instance Giles and Robinson suggested that the valuation of human assets should be made in term analogous to the valuation of a business on a going concern land.The price earning ratio, which relates market capitalization to the latest reported earning view is their point of departure. Based on a try of companies with similar characteristics, an average P/E manifold is computed and then adjusted to arrive at the multiple applicable to the firm by providing for (deducting from the average multiplier) the factors that are not related to human assets. The multiple is further adjusted as needed, for application to different job categories.Gross remuneration of employees and all additional expenditures related to investments in human resources are capitalized by using the appropriate multipliers. The technique provides the basic data necessary for periodic human asset, balance sheets and income statements and human asset profiles and projections o f the firm. The multiplier represents a number of years capitalization of the annual human resource figure. The total human asset value in a firm is either equal to or less than the amount of goodwill (the going concern value less net non-human assets).Due allowance is made for other goodwill elements, such as product loyalty, patented processes and the value of long term contracts. The net change in human assets value in a period is computed as the difference between capitalized amounts which enhance the value and capitalized provisions for dimension or amortization of value. Lev and Schwartzs model This model determines present value of future earnings of a person in an organization. The model developed by Lev and Schwartz to estimate human capital value of a person (y years old) is EVr*=t=rTPr? t+1)i=rtIi1+rt-r Where EVr*= the human capital value of a person r years old. I(i)= the persons annual earning until retirement and this serial publication is represented graphically by th e earnings profile. r= a discount rate specific to the person. T= retirement age. Pr(t)= Conditional prospect of a person of age r dying in year t. I*t=fI? (t), t=r,.. ,T This model provides a reasonable measure of human capital which could be used for aggregation in macro statistics and in assessing the dynamics and mobility of such capital.While the authors record that capital values determined by use of this model will provide financial statement uses with expensive information about changes in an organizations labour force, the models use for practical decisions of managers of organizations or of potential investors in organization is obscure or even non-existent. harmoniums exemplification Organ attempted to measure in monetary terms the net present values of some of the human resources of a certified public accounting firm. A human resource value model was utilized in the research which is exhibited in table 2. Table 2. 3 Major Determinants of human Resource value person ate germ Pekin Organ, Application of a Human Resource Value forge A field Study, Accounting, Organisation and Society, Vol. 1 No. 2-3, 1976, p. 198. According to Organ, there are seven major determinants of the values of human resources. Monetary value benefits potential. The individual performance index. Efficiency index. Standard work index. Maintenance costs (salaries or wages) Start-up costs (recruiting, initial training). Training and development costs. luck of continued employment.Probability of survival. Organ entrusts that has model generates data that are amiable for use in an on-going manner like a performance evaluation system or a human resource value accounting system. Organs model has two major limitations which are, one, the total value of the individual is not considered, and two, the model is limited for use in professional service organizations. Jaggi and Laus Model In human resource valuation, there is a problem of forecasting the expected promotion chances and tenure of employees on an individual basis.To overcome this problem, Jaggi and Lau refer to group as homogenous group of employees who may not be necessarily working in the same department. They claim that on a group basis it is possible to know the percentage of people (in a particular group or department) likely to get promotions or to leave the organization before death or retirement in future years. This model assumes that the pattern of employees movement generally stay constant over time. Therefore, predictions based on historical data for one period can be used for future periods also.The authors assert that with some intuitive justification, the model is likely to provide greater accuracy and reliability. Morses Model According to Morse in his study A Note on the Relationship between Human Assets and Human Capital, (1973), the following equation was implicating attributed to Flamholtz A=i=1NrTIi(t)1+rt-r+rTX(t)1+rt-rdt equating 1 Where A= human assets value to a formal or ganization N= Number of individuals before long employed by the organizations R= current timeT= highest time at which an individual before long employed leaves the organization Ii(t)= net value of the services rendered by individual i at time t to the organization, Ii(t)=Gi(t)-Ei(t). Gi(t)= gross value of services rendered by individual i at time t to the organization. Ei(t)= all direct and indirect compensations given to individual i at time t by the organization. X(t)= value of services of all individuals presently employed working together in excess of value of their individual ervices at time t and r= time value of money. Morse then converts the Lev and Schwartz equation, which determines an individuals human capital value under certainty to C=i=1NrTEi(t)1+rt-rdt Equation 2 Which according to Morse, is the total human capital employed in an organization as it exists at time r. Now, by expand equation 1 and re-arranging it, the write says Equation 3 says that the present value (PV) of human assets equals Total Present value (TPV) of human resources less present value of payment to the employeed.Flamholtz Model Flamholtz in 1971 proposed a normative human resources valuation model which would trace the movement of an employee through organizational positions or service state where the employee is expected to render in specific quantity of service to the organization during a specified time period. The luck of the individual occupying this service state is needed so that expected service from the individual can be derived using ES=i=1NSiP(Si) Equation 4Where Si= services that are required from the individual in a service state and PSi= probability that the individual will occupy the particular service state. The service than an individual renders determines his or her value to the organization and Flamholtz stated that the monetary equivalent of this services can be represented in two ways. The first way is to determine the quantity and price of the servic es and use their product as the monetary equivalent, and the molybdenum expected services are discounted so that their present value can be determined.Also, in 1972, Flamholtz offers a model for calculating an individuals value to an organization using the present value of the set of future services the employee is expected to remain in the organization. This model is conceptually sound from a benefit point of view and would have left little room for improvement. During this same year, Flamholtz proposed expected realizable value as a form of economic valuation of the human resources. His model postulates that an individual is not valuable to an organization in the abstract.An individual is valuable to an organization in relation to the personal attributes and the characteristics of the organization. On a conceptual and theoretical level, Flamholtz has tried to identify the key variables that determine an individuals value to an organization and the inter- bloods of such variables he recognizes that these determinants may land themselves to monetary or non-monetary indicators. The model developed by Flamholtz is shown in table 2. 4 below. hedge 2. 4Revised Model of the determinants of an Individuals value to a formal organization Source Eric Flamholtz, Human Resource Accounting A Review of Theory and Research, unpublished paper presented to the Organization Behaviour Division at the 32nd Annual Meeting of the Academy of management, Minneapolis, Minn. , terrific 15, 1972, p. 10. Flamholtz suggested appropriately that this model is suggested as a first step toward the development of a theory. It is conceptual theoretical and perhaps only impressionist.One of the most difficult aspects of calculating realizable value is the affection of the value of a persons expected services. Flamholtz had proposed that it might be desirable to use a substitute measure of surrogate, for this purpose. Examples of possible surrogate measures include compensation, replacement cost and performance indexes. In an taste designed to test the appropriateness of using these measures. Flamholtz found that all three may be relevant for this purpose. He suggested that the choice of the best measure in a specific situation will depend on the intended use of the data.To summarize, according to Flamholtz, the measurement of human resource value of an individual to an organization requires the following Estimate the total time period during which the individual can be expected to render services to the organization. Identify the various service states (i. e. position) that the individual may occupy during the time he is with the organization. heartbeat the value derived by the organization if the individual occupies the various service states for the specified time periods. Estimate the probability that the individual will, in fact, occupy each state at the specified future time.Akintoyes Model Akintoye in 2006 proposed the Net Benefit Model to human resources acco unting in service organization as an expectation of the earlier conventioned models of Morse (1973), Lev and Schwartz (1971, 1972) and Flamholtz (1971, 1972). In this type of an organization, the estimate of benefit generation is a comparatively simple exercise. Each employee has a stipulated and readily ascertainable billing rate and amount of time (measured in billable hours) over his or her estimated useful life with the organization. That may be other types of organizations that give themselves to parallel measurement like doctors and lawyers.The Net Benefit Model as proposed by Akintoye is hereby stated in it most general form below, thereafter the suggested constructs are explained and illustrated in details. Cij=j=1nk=tE-t1(1+r)c? Bqj Equation 1 Where *Figure 1 Adjusted Net Value of Human Resource for the *Organization The equation 1 above tells us that the total adjusted net present human resources benefit of a services organization is equal to the summation, discounted cert ainty-equivalent net benefits of the employees in the organization as shown in the above figure.The major thrust of this work is to think the determinations of certainty-equivalent net benefit streams generated by each individual, after all, the individual are determined, the total human resources benefit for the organization can be resolved by relatively simple procedures of discounting aggregation (Equation 1 and figure 1 refer). drift throw away Figure 2 Major Determinants of Certainty Equivalent Net Benefits cozy up surroundEmpirically, analysis made by Walker (1995) with the aid of diagram showed that Human Resources Accounting in services organization seeks to make managers more of the importance of people as valuable resources and to hold managers more accountable for these resources. It is also an excellent way to assess management performance in this use of human resources. In this way it is expected to encourage better planning for human resources and better decisions w herever they involve people.Lastly, Human Resources Accounting in service organization is an excellent way to encourage managers to take a long-run outlook towards the value of people, rather than a short-run, quick-profit outlook that ignores human resources. Figure 3 Source James W. Walker (1995), Grolier Library tours (1965) stated that an individual who is involved in an exchange relationship, such as exchanging services for pay in a gainful employment situation, will perceive his or her inputs in more than monetary terms. The perceived input include effort, education, experience, skill, seniority and job status.Inputs are considered relevant only if they are perceived as inputs by individual contributor. On the other side of the exchange relationship is what the individual perceives he or she is deriving from the job- sidings. These are categorized in terms of their recognition and relevancy and include salary, prerequisite, prestige and personal fulfillment. The individual wi ll make comparisons of his or her output-input ratio with the situations of others whom he or she considers equal, in an all round sense.The purpose of this comparison is for the individual to determine whether the ratio of his or her output to input is fair. In making this comparison, the individual has in mind another specific individual whom Adam calls the individuals referent. When the normative expectation of the individual in this comparison is violated to that of his or her output-input ratio as perceived is not equal to that of his or her referent (peer), then a tincture of in equity may result.Note that in this definition of inequity, the absolute level of outputs and inputs for the individual and his or her referent is irrelevant. What determines the equity of this output-input comparison is the individuals perception of what he or she is giving and receiving as well as what he or she perceives the referent is giving and receiving. The relationship may occur when the indi vidual and his or her referent are in a direct exchange relationship with a third base party. throw offframe Symbolically, inequity exists whenWhere Oi=Output of the individual. Similarly, the individual will perceive a condition of equity when The relationship of equity theory to the individuals perceived proceedss and peers perceived reward is that when the balance of ratio of these indices is disturbed, this will affect the individuals internal satisfaction. Also it should be pass on from Adams model that a feeling of inequity may exist when the individual perceives his or her ratio of output as greater or less than his or her referents ratio.This indicates that the model is realistic and not unidirectional. CHAPTER THREE RESEARCH METHODOLOGY 3. 0 INTRODUCTION This chapter covers the method used in the collection and generation of data in carrying out this study. It deals with the basic methods, sources of data and procedures used in pull together and analyzing of data and t he problem s encountered in collecting the information required for the research. 3. 1 RESEARCH bearing Research design means the structuring of investigation aimed at identifying variables and their relationship to one another.It is used for the purpose of obtaining data to enable researcher test theory and answer research questions. In an attempt to properly carryout this research, the researcher has obtained materials from both primary and secondary data. PRIMARY information Primary data is information obtained for particular purpose/problems under consideration. According to Anyanwu (1994), it is first hand tailor made information be it personal, by a phone and by use of questionnaire formation.This research work employed the use of closed ended questionnaires administration as its sources of primary data in order to get the business opinion on the many questions to be asked. SECONDARY DATA Is information assembled for some other purpose which the researcher finds relevance to his own research and incorporates these into his own work. Sources of secondary data used in this research includes articles in journal, textbooks, post written project work, newspaper articles, Access bank Annual Financial Report. 3. 2 RESEARCH creation/POPULATION SIZE . 3 SAMPLING PROCEDURES However, due to some constraints like money, time, human and material resources and other facilities the use of the entire research population is not only difficult but not feasible. Hence, there is need for the use of a subset of the entire population. Based on this fact, the use of judgemental/non-probability sampling is employed in choosing the sample size. Sampling according to Anyanwu (1994) is a process of selecting a proportion of the population for the purpose of generalizing the result from he sample about the population itself, the target population and any other population having the same characteristics. The researcher has some element of control because in non random sampling process, the researcher selects his sample on the basis of his own knowledge of the population its elements and the nature of the researcher aim. 3. 4 SAMPLE PLAN The study employed the use of primary data through questionnaire sampled among the employees of Access Bank Plc. , service industries and professionals. A total of cubic decimetre questionnaires were administered and these questionnaires were distributed to the selected sample size.At the end, 40 completed questionnaires were personally retrieved. Thereafter, the completed questionnaire were tested for validity 3. 5 DATA ANALYSIS Based on the nature of the study, analysis has been limited to the use of Chi-Square (? 2). Data analysis contains the statistical calculations performed with the raw data collected to provide answer to the questions initiated in the research. Chi-Square (? 2) is defined as the sum of the ratio of difference between the lame of sight and expected frequencies (Hoel Paul, 2005).It is a measure of significances and is important in venture testing especially in the type of research where only people who are among the managerial staff of the institution are required to fill the questionnaires to compute the Chi-Square, we find the difference between the sum of square of the find and expected frequencies and divide whatever is gotten by the expected frequencies. Mathematically, the Chi-Square can be expressed thus, is given as ? 2=O-E2E O is the observed frequency. E is the expected frequency. ? is the symbol of summationIf the value of the observed value is greater than the expected value, the Chi-Square will largely indicate a poor experimental agreement, if the observed value and the expected value perfectly agree with one another the value of the Chi-Square will be zero. Indicating an excellent or perfect experimental agreement, however, the value of the Chi-Square can never be zero Taylor (1977). The academic degree of freedom (df) is another important feature of the Ch i-Square distribution. Its computational formula is given as df=(r-1)(c-1) The decision curb is that if the computed value of Chi-Square is greater than tabulated critical value (? ). The null hypothesis is rejected as the state of significant. If the test is less than the critical value, the null hypothesis is retained (Murray 1977). A Chi-Square test is always a one tailed test. The level of the significance is 0. 05 or 5% which will be given in the Chi-Square table. 3. 6 RESTATEMENT OF RESEARCH brainS Most income statements are incomplete without adequate consideration and inclusion of human resources element in the financial statement. The following are the research questions How can the monetary value of employee service be established?Can these monetary values aid the management in internal control problem? What are the possible effects of the monetary worth of employee service to the profitability of an organization? What impact would the development of employee have on the general performance of an organization? 3. 7 RESTATEMENT OF RESEARCH HYPOTHESES Hypotheses set to be tested are stated below H0 There is need for capitalization and amortization of human resources like fixed assets in financial statement. H1 There is no need for capitalization and amortization of human resources like fixed assets in financial statement. . 8 LIMITATION OF THE STUDY Factors limiting the scope of the study are as follows epoch The research is expected to merge school activities as a student with gathering data for this study. Also, the staffers of Access Bank Plc have to combine their daily work with attending to the researcher using their leisure time. revelation OF HUMAN RESOURCE ACCOUNTING INFORMATION Company had not made any serious attempt to provide HRA information in their published annual reports and is an area which is not yet fully developed. Further to attach quantitative values to them.The report is limited to use of questionnaire to gathered relevant da ta. Inspite of these limitations, this investigation will yield beneficial results and the limitations of this study will not have any significant effect on the research result. CHAPTER FOUR PRESENTATION AND ANALYSIS OF DATA textlist-item This chapter presents and analysis the data collected from Access Bank, First Bank Plc and United Africa Company (UAC). This is done on other to find out the peradventure of human resource accounting. Through this analysis, the hypothesis set forth is either validated or nullified.The hypothesis states that most income statement are incomplete without adequate consideration and inclusion of monetary value of human resource element in the financial statement, and there is need for capitalization and amortization of human resources like other fixed asset in the financial statements. The findings present in this research are based on the response on the model of data selection supporting or negating the hypothesis. SUMMAR Y OF THE wonderNAIRE DISTRI BUTED AND RESPONES store The table shows that out of 30 questionnaire representing 42. % of the total distribution which were administered to Access Bank 27 or 38. 6% were returned, leaving a shortfall of 4. 3%. 20 questionnaire representing 28. 6% of the total distribution were administered to First Bank, of this questionnaire 19 representing 27. 1% were returned leaving a shortfall of 1. 4% while 20 questionnaires representing total distribution were administered to UAC, 18 representing 25. 7% were returned but 2 which is 2. 9% of the questionnaire were not returned. It should be noted that all returned questionnaire were used in this research based on the responses to the question.The researcher decides to select questions closely related to the hypothesis for the testing of the hypothesis. textlist-item Earlier in this research, it has been show that different schools of thought exist in respect of human resources accounting. In order to ascertain possibility of human accountin g the analysis of all the questions will have to be used raceframe TABLE 4. 2 DISTRIBUTION OF RESPONDENTS BY EDUCATIONAL QUALIFICATION decipherframe TABLE 4. 3* DISTRIBUTION OF RESPONDENTS BY *HOW LONG THEY HAVE BEEN IN THE ORGANIZATION drawframe TABLE 4. * DISTRIBUTION OF RESPONDENTS BY *MARITAL STATUS drawframe TABLE 4. 5* DISTRIBUTION OF RESPONDENTS BY *COMPANY THEY WORK drawframe TABLE 4. 6* DISTRIBUTION OF *THE solution ON THE QUESTION HAVE YOU HEARD ABOUT HUMAN RESOURCES ACCOUNTING? drawframe From the above, 64 respondents answered the question. 85. 9% have heard about human resource accounting, while 14. 1% said they have not heard about human resources. TABLE 4. 7* DISTRIBUTION OF *THE rejoinder ON THE QUESTION DO YOU return THAT THE SKILL OF EMPLOYEE CAN BE MEASURED IN MONETARY TERMS? drawframeOut of the 55 respondents who have agreed that they have heard about human resources accounting, 56 agreed to the fact that the employee skill can be measured in monetary term s, while 8 respondents said the skill cannot be measured in monetary terms. TABLE 4. 8* DISTRIBUTION OF *THE rejoinder ON THE QUESTION DO YOU THINK THIS SKILL *IS *TRUELY REFLECTED IN THE FINANCIAL STATEMENT OF AN ORGANIZATION? drawframe 48 out of the 64 respondents says that the skill is not truely reflected in the financial statement, while 16 said the skill is truely reflected in the financial statement. TABLE 4. * DISTRIBUTION OF *THE reaction ON THE QUESTION be YOU SATISFIED WITH THE PRESENT METHOD WHEREBY HUMAN RESOURCES IS REFLECTED IN FORM OF SALARIES AND WAGES ONLY? drawframe In the above question 47 respondents replied that they were not satisfied with the present method whereby human resources is shown in form of wages and salaries. 17 respondents believed that it were to shown in form of wages and salaries *TABLE 4. *10* DISTRIBUTION OF *THE resolution ON THE QUESTION DO YOU FEEL THAT HUMAN RESOURCES SHOULD BE CAPITALIZED AND AMORTIZED LIKE OTHER FIXED ASSETS? draw frameOut of the 64 respondents, 53 believe that human resources should be capitalized and amortized with other financial assets, while 11 respondents said human resources should not amortized and capitalized. TABLE 4. 11* DISTRIBUTION OF *THE receipt ON THE QUESTION DO YOU THINK MONETARY WORTH OF AN EMPLOYEE SKILL OR SERVICES CAN AFFECT THE advantageousness OF AN ORGANIZATION? drawframe 58 i. e. 90. 6% were of the opinion that the monetary worth of an employee can affect the profitability of organization, while 9. 4% were of the view that such cannot affect the protability of the organization.TABLE 4. 12* DISTRIBUTION OF *THE RESPONSE ON THE QUESTION DO YOU THINK THIS MONETARY VALUES OF HUMAN RESOURCES CAN THUS BE JUSTIFIED LIKE ANY OTHER ITEMS IN THE INCOME STATEMENT? drawg 54 respondents states that the monetary values of human resources can be justified like other items in the income statement, i. e. they can be treated and adjusted in the financial statement, while 10 respon dents says otherwise. TABLE 4. 12* DISTRIBUTION OF *THE RESPONSE ON THE QUESTION DO YOU THINK THAT HUMAN RESOURCES ACCOUNTING IS POSSIBLE? drawframe 82. % of the respondents felt up that human resources accounting because in production we cannot do without human factor, while 17. 2% feel that human resources accounting is totally impossible. TABLE 4. 13* DISTRIBUTION OF *THE RESPONSE ON THE QUESTION DO YOU THINK INCOME STATEMENT IS COMPLETED WITHOUT THE CAPITALIZATION ND AMORTIZATION OF HUMAN RESOURCES? drawframe 51 respondents believe that income statement is not completed without the capitalization and amortization of human resources, while 13 respondents believe that there is no need for the capitalization and amortization of human resources.TABLE 4. 14* DISTRIBUTION OF *THE RESPONSE ON THE QUESTION DO YOU THINK INCOME STATEMENT IS COMPLETE WITHOUT ADEQUATE CONSIDERATION OF HUMAN RESOURCES? drawframe 55 respondents maintain and believe that human resource elements are not wel l handled in the financial statement which the make the income statement incomplete, while 9 respondents feels that the income statement is complete without the consideration of human resources. TABLE 4. 15* DISTRIBUTION OF THE RESPONSE ON THE QUESTION DO YOU BELIEVE THAT HUMAN RESOURCES ACCOUNTING provide HAVE IMPACT UPON CORPORATE FINANCIAL REPORTING IN THE FUTURE? drawframe 7. 8% of the respondents believe that human resources will have no impact upon corporate financial reporting in the future. 92. 2% felt that human resources accounting will have great impact upon corporate financial reporting in the future. TABLE 4. 16* DISTRIBUTION OF *THE RESPONSE ON THE QUESTION ARE HUMAN RESOURCES (PEOPLE) THE MOST IMPORTANT ASSET OF AN ORGANIZATION? drawframe TABLE 4. 7* DISTRIBUTION OF *THE RESPONSE ON THE QUESTION DO HRA INFORMATION PLAY ANY ROLE IN MAKING enthronement DECISION BY INVESTORS AND OTHER USERS? drawframe 58 out of the 64 respondents felt that human resources accounting will play an important role in making investment decision by investors. 6 respondents believe that human resources accounting cannot affect investors decision in making in investment decision. textlist-item Question 5 and 10 give response to the null hypothesis which is to be tested. CHI-SQUARE tally drawframe drawframe CHI-SQUARE TEST drawframe drawframe