The Importance Of Human Resource Accounting

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Human resources have been recognized as one of the main source of competitive advantage by many organizations in today's complex business environment. If an organization has competent human resources, it can give investors a reasonable assurance that their money is put into a good investment. So, information about company’s human resources is valuable and should be disclosed to the stakeholders. However, under the current accounting principles there is a lack of both correct measurement and correct disclosure of human resources in the financial reports. Although firms devote significant investments in its human resources; the problem is that these investments are immediately expensed in the financial statement. Besides, the traditional model…show more content…
However, there is a wide increase in the number of service companies around the global at the present time, where employees' knowledge, skills, proficiency and experience are key elements to their success.Unfortunately, the traditional accounting practices failed to cope with the change towards a knowledge driven economy.Under the current accounting principles, there is a lack of both correct measurement and disclosure of human resources in the financial reports. In addition, the information produced by the traditional accounting system has limited usage for decision making process and encourages short-term thinking and leads to many wrong decisions (Jaarat, 2013). Consequently; the adequacy and materiality of the current accounting practices is questionable and Human Resource Accountinghas become a necessity at the present time. Although, the relevance and importance of Human Resource Accounting are well established, the recognition of human resource assets is considered too unreliable for financial reporting due to a lack of control over future economic benefits and the absence of reliable measurement techniques. Lack of reliable measurement is a challenge due to a lack of an active market and there is currently no accepted way of doing this. Indeed, it is a new and evolving science which needs a lot of researches (Rowbottom,…show more content…
- To what extent is it possible to consider Human Resource as one of any entity's assets? - Is it feasible to apply the Human Resource Accounting in sporting clubs? - What is the proposed accounting treatment for human resources in Sporting Clubs according to this research? - Is there an acceptance from the academic researchers on the proposed accounting treatment? - Is there an acceptance from the financial accountants in sporting clubs on the proposed accounting treatment? 1.2. Research objectives: This research aims at enriching the accounting literature with a critical issue which is Human Resource Accounting. The research aims to examine whether there is a gap in the accounting for Human Resources. Besides, the research aims to evaluate the feasibility of applying the Human Resource Accounting with particular reference to Sporting Clubs. The research presents a suggested accounting treatment for Sporting Clubs and examines whether there is an acceptance to the Accounting for Human Resource from the Academic Researchers and from the Financial Accountants in Sporting Clubs. As well, the research analyzes and compares how a sample of Egyptian sporting clubs accounts and discloses for the values of their players to answer how each club accounts for the values of their players and what kind of information each club discloses on their financial statements.Accordingly based on this research; the grounds on which sporting

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