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Financial implications of accounting for human resources using a liability model

Financial implications of accounting for human resources using a liability model Purpose – The purpose of this paper is to: discuss how reporting under a human resource liability paradigm fits into the traditional accounting framework of contingent liabilities; examine the financial effects of such reporting on market valuation and internal planning; and explore measurement of human resource liabilities. Design/methodology/approach – From reviews of financial effects of human resource liability reporting the paper logically extends those results to support the proposed paradigm. Findings – Accountants already recognize some liabilities resulting from future expenses for past labor. A fuller treatment of expected costs from human resource polices would provide external and internal financial analyst with different and useful information. Recognizing these future expenses will depress asset turnover and return on asset calculations, while increasing estimates of risk such as higher debt ratio, lower cash flow coverage and higher degrees of operating leverage. Originality/value – The paper provides support for the feasibility and need to adopt a human resource liability paradigm for valuing, reporting and managing human resources. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Human Resource Costing & Accounting Emerald Publishing

Financial implications of accounting for human resources using a liability model

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References (74)

Publisher
Emerald Publishing
Copyright
Copyright © 2008 Emerald Group Publishing Limited. All rights reserved.
ISSN
1401-338X
DOI
10.1108/14013380810889556
Publisher site
See Article on Publisher Site

Abstract

Purpose – The purpose of this paper is to: discuss how reporting under a human resource liability paradigm fits into the traditional accounting framework of contingent liabilities; examine the financial effects of such reporting on market valuation and internal planning; and explore measurement of human resource liabilities. Design/methodology/approach – From reviews of financial effects of human resource liability reporting the paper logically extends those results to support the proposed paradigm. Findings – Accountants already recognize some liabilities resulting from future expenses for past labor. A fuller treatment of expected costs from human resource polices would provide external and internal financial analyst with different and useful information. Recognizing these future expenses will depress asset turnover and return on asset calculations, while increasing estimates of risk such as higher debt ratio, lower cash flow coverage and higher degrees of operating leverage. Originality/value – The paper provides support for the feasibility and need to adopt a human resource liability paradigm for valuing, reporting and managing human resources.

Journal

Journal of Human Resource Costing & Accounting – Emerald Publishing

Published: Jun 27, 2008

Keywords: Financial reporting; Accounting; Human resource management

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