Human Resource Accounting for Effective HR Decisions

Human resource accounting (HRA) as an approach was originally defined as the process of identifying, measuring and communicating information about human resources in order to facilitate effective management within an organization. It is an extension of the accounting principles of matching costs and revenues and of organizing data to communicate relevant information in financial terms. The subject of offering measures of the values of people to the organization through human resource accounting has tempted human resource professionals and academics alike. Flamholtz and Lace (1981) have defined this approach in the following way: "Human Resource Accounting may be defined as the measurement and Reporting of the cost and value of people as organizational resources. It involves accounting for investment in people and their replacement costs, as when as accounting for the economic 'Values of people to an organization."