VOLUME NO. 1 (2010), ISSUE NO.

2 (JUNE) ISSN 0976-2183

CONTENTS
Sr. No. Article / Paper Page No.
1. THE RELATIONSHIP BETWEEN ERP SYSTEM’S 1
FUNCTIONALITY AND SUPPLY CHAIN MANAGEMENT
PERFORMANCE
DR. MATHEW PHILIP
2. UNDERSTANDING THE FACTORS AFFECTING SELECTION OF A 30
TRANSPORT SERVICE PROVIDER – AN EMPIRICAL ANALYSIS
KUNAL GAURAV & SANDIP BHOWAL
3. IMPACT OF DISINVESTMENT ON THE FINANCIAL AND 40
OPERATING PERFORMANCE OF COMPETITIVE AND
MONOPOLY UNITS OF INDIAN PUBLIC SECTOR ENTERPRISES
DR. GAGAN SINGH & DR. DEEPAK PALIWAL
4. HUMAN RESOURCE ACCOUNTING PRACTICES IN SELECTED 58
COMPANIES IN INDIA
DR. YAGNESH M DALVADI
5. PRESCRIBERS SEGMENTATION-STRATEGY FOR 70
PHARMACEUTICAL CORPORATIONS SUCCESS
DR. K C MITTAL & DR. HARPREET SINGH
6. IMPACT OF GLOBALIZATION ON SERVICE SECTOR 80
A. KOTISHWAR & PROF. MOHD AKBAR ALI KHAN
7. CORPORATE SOCIAL RESPONSIBILITY (CSR) INITIATIVES IN 113
ASIA: A BURGEONING QUINTESSENCE
ASHOK KHURANA
8. REVIEWING MAHATMA GANDHI NATIONAL RURAL 128
EMPLOYMENT GUARANTEE SCHEME (MNREGS)
DR. KULBHUSHAN CHANDEL, DR. RAKESH SHARMA & DR. (MRS.) USHA SHARMA
9. STABILITY OF BETA: AN EMPIRICAL INVESTIGATION ON 153
NIFTY STOCKS
S. SYED AHAMED, G. SARAVANAN & DR.MALABIKA DEO
10. OPERATIONAL EFFICIENCY OF MERGED BANKS IN INDIA – 168
DISCRIMINANT ANALYSIS APPROACH
DR. N. BHARATHI
11. RETAIL SCENE IN INDIA: AN OVERVIEW AND OPPORTUNITIES 193
DR. MANDEEP SINGH & RAVNEET KAUR BINDRA
12. CUSTOMER SATISFACTION AND COMPETENCIES: AN 207
EMPIRICAL STUDY OF AMBALA, KURUKSHETRA AND
YAMUANANAGAR DISTRICTS OF HARYANA, INDIA
DR. SUDESH & CHETAN MOHAN

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VOLUME NO: 1 (2010), ISSUE NO. 02 (JUNE) ISSN 0976-2183

HUMAN RESOURCE ACCOUNTING PRACTICES IN SELECTED

COMPANIES IN INDIA

Dr. Yagnesh M Dalvadi

Asst. Professor

P. G. Department of Business Studies

Sardar Patel University

Vallabh Vidyanagar 388 120, Gujarat (India)

Abstract

Recently we witnessed a global transition from manufacturing to service base economies. In

manufacturing organisation the physical asset likes plant, machinery, material etc. are of important. In

service industry the total worth depends mainly on the skills of its employees and the service they

render. The success of these organizations is contingent on the quality of their human resource - its

knowledge, skills, competence, motivation and understanding of the organizational culture. Hence, it is

imperative for the firm to understand the importance of the human and therefore record it in the books of

accounting. In present corporate world whether it belongs to manufacturing, Trading or Service human is

at center point. This study focuses on Human Resource Accounting (HRA) Practices of selected private

and public limited companies.

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INTRODUCTION

HRA is a management tool which is designed to assist senior management in understanding

the long term cost and benefit implication of their HR decision so that better business decision

can be taken. If such accounting is not there , then the management runs the risk of taking

decision that may improve profit in the short run but may also have severe repercussions in

future.HRA is an attempt to identify and report investment made in the human resource of an

organization that are not presently accounted for under conventional accounting practice.

“Human Resource Accounting is the measurement of the cost and value of the people for the

organization” -Eric flamholtz of University of California, Los Angeles.

“Human Resource Accounting is the process of identifying and measuring data about human

resource and communicating this information to interested parties”. -

American Accounting Society Committee on HRA

RESEARCH METHODOLOGY

Scope

The Scope of the study title “Human Resource Accounting Practices in Selected Companies in

India” limited to Human Resource Accounting Practices of companies for the period of five year

commencing from 2003-04 to 2007-08. The research has identified various reporting practices of

Human Resource Accounting in its annual report. Reporting Practices of Selected private and Public

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companies has been explored. Two companies from private sector and two companies from public sector

were taken as sample and comparative study has also done.

Objective of the Study

1. To examine the practices followed by selected companies in India.

2. To compare and contrast human resource valuation methods followed by selected Public and

Private Companies in India.

3. To give suggestions for improvement in HRA Practices in Selected companies in India

Sample Selection

Purposive Sampling technique is used for the selection of sample units. Samples are taken from both

public and private sector companies. From public sector two companies selected i.e. BHEL and SAIL

and two companies from private sector i.e. INFOSYS and ACC. All Companies are taken on the basis

of its market capital as on 1.1.2009.

Source of Data

An annual report, websites, different books of management accounting & personal management, previous

research findings (Thesis and Dissertations) has been used for source of secondary data.

Analysis of Data

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The collected data have suitably classified and tabulated in the form of table and graph with the

appropriate statistical techniques S.P.S.S.15 software has used for necessary statistical tests. The data

analysis and conclusion were drawn on the basis of parametric tests at 5% level of significance.

DISCLOSURE RELATING TO HUMAN RESOURCE ACCOUNTING

BHEL

BHEL had started providing information related to Human Resource Accounting (HRA) in its annual

report from the financial year 1974-75 by using Lev and Schwartz model. It is the first company in India

who provided HRA. BHEL also started considering efficiency factor for the purpose of Human

Resource Valuation from the year 1980-81.

BHEL divides total employees of the organization according to group wise, category wise and also as per

physically challenged employee. The company followed the 12% as discount rate. Company provide the

information regarding particular of employee under section 217(2A) of the companies Act, 1956 with

companies rules 1975.

BHEL was reporting information like total No of Employee, Value Added, Employee Remuneration and

Benefit, Value Added per Employee, Turnover per Employee. It also calculated the different ratio related

to Human Resource.

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SAIL

SAIL started valuation and reporting of its human resource from the financial year 1983-84.SAIL

follows the human resource valuation model suggested by Lev and Schwartz by accommodating

some adjustments suggested by Flamholtz and Jaggi and Lou. SAIL uses the constant rate of

discounting the future expected return at 15%.Company provide the information regarding

employee under section 217(2A) of the Companies Act 1956 with Companies Rules

1975.SAIL provides the information regarding No of Employee, as well as Category wise Distribution

of Employee . Company also provides the information about Turnover, Value Added, and Capital

Employed, EPS, Net worth per Share, Employee Remuneration and Benefit. It also communicate

different ratio like PAT/Average Capital Employed.

INFOSYS

Infosys provide additional information of the firm from intangible assets score sheet, Human Resource

Accounting and Value- Added statement. Infosys provide the information regarding particular of

employees under the provision of section 217(2A) of the Companies Rules 1975. Infosys used the Lev &

Schwartz model. The future earning have been discounted at 14.09 %, 13.63%, 12.96%, 14.97% and

13.32% in the year 2003-04,2004-05,2005-06,2006-07 and 2007-08 respectively. Infosys provide the

information like Income, value added, No of Employee, Age wise Distribution and Category wise

Distribution of Employee, Net Worth, EPS, Economic Value Added, Value of Human Resource, Value of

Human Resource per Employee and also present the ratio like Value Added/Human Resource Value,

Return on Human Resource Value in percentage.

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ACC

ACC started valuing and reporting the information related to human resource from the financial year

1983-84 by using Lev and Schwartz model with adjustments suggested by Flamholtz. It provides the

information regarding No of Employee, Basic Earnings per Share, Capital Employed, and Earning

per Share, Total Asset and also Employee Cost. Company had not reported the discount rate i.e. rate at

which the future expected return was discounted.

For the purpose of comparative evaluation, 14 variables has been indentified like disclosure of value

added, Economic Value added (EVA) etc.

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DISCLOSURE OF SELECTED VARIABLE FOR HR RELATED INFORMATION BY

SELECTED COMPANIES.

D= Disclosed ND= Not Disclosed

Company
Disclosure of Variables Total
BHEL SAIL INFOSYS ACC

Value Added D D D ND 3

No of Employee D D D D 4

EVA D ND D ND 2

Value of HR ND ND D ND 1

value of HR per Employee ND ND D ND 1

Value Added per Employee D ND ND ND 1

Valuation Model Used D D D ND 3

Discount rate applied D D D ND 3

Age wise Distribution ND ND D ND 1

Group Wise Distribution D D D ND 3

Gender Wise Distribution ND ND D ND 1

Turnover per Employee D ND ND ND 1

Employee cost ND ND D D 2

Total Identified Variables 8 5 11 2 26

Table-1 Disclosure of Various Variables

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Table-1 shows the disclosure of identifies variable from the annual reports of selected companies for

Human Resource related disclosure.

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8
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Chart -1 Disclosure of Various Variables

Table-1 and Chart-1 shows Human Resource Accounting disclosure practices by BHEL, SAIL,

INFOSYS, and ACC. The table helps to understand which company provides more information

regarding its HR. It can be seen that INFOSYS provides 11 type of information (i.e. 84.6%) out of 13

listed information. BHEL disclose the 8 type of information (i.e. 61.53 %), than comes SAIL, it provide

the 5 type of information (i.e. 38.46%) and ACC provide only 2 type of information (15.38%).

HYPOTHESIS

Ho: There is no significance difference between average disclosures of selected companies.

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H1: There is significance difference between average disclosures of selected companies

Testing of Hypothesis

One-Sample Statistics

Std.

N Mean Deviation Std. Error Mean

Average

Disclosure 4 49.995 29.79099 14.89549

One-Sample Test

Mean 95% Confidence Interval of the

T df. Sig. (2-tailed) Difference Difference

Lower Upper Lower Upper Lower Upper

Average

Disclosure 3.356 3 0.044 49.995 2.5909 97.3991

One Sample t test was conducted to test the hypothesis. As the p value of test is 0.044 (less than 0.05)

there for we accept the alternative hypothesis i.e. there is significant difference between the average

disclosures of selected companies, and reject the null hypothesis.

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SUGGESTIONS

Suggestion to sample companies

1. ACC Ltd. Should provides more information regarding its Human Resource. ACC Ltd. Should

include value of HR, Value of HR per Employee, GroupWise Distribution, Gender wise Distribution

, Turnover per Employee etc. in its annual report.

2. There is no clarification regarding Human Valuation Model used and discount rate applied by

ACC Ltd. in its annual report. So, company should disclose clearly for the better understanding.

3. BHEL and SAIL Ltd. Should also report for Value of HR, Value of HR per Employee, Age and

Gender Wise distribution in its annual report.

Suggestion to Government

1. The measurement is subjective as methods for this purpose, so government should suggest

specific model that is acceptable to all companies.

2. The government should made mandatory to value and disclose HR related information in its

annual report.

3. To motivate companies for HRA, government should provide incentives like Subsidy, Tax

exemption.

LIMITATION OF THE STUDY

The following are the limitations of the study.

1. The said study is based on secondary data only, collected from annual reports of companies. The

limitation is of secondary data influence the study.

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2. The study period of said study is limited to five year only i.e. 2003-04 to 2007-08. Only four

companies viz., BHEL, SAIL, INFOSYS and ACC have been considered for the study of Human

Resource Accounting Practices.

REFERENCES

Brummet, R.L., Flamholtz, E.G., (1969), “Human Resource Accounting Tool to Increase Managerial,

Effectiveness”, Management Accounting, August.

Deo Amitabh Kodwani, Tiwari Ravindra, “Human Resource Accounting- A new dimension”, Canadian

Accounting Association 2006 Annual conference 2007.

Flamholtz Eric (1974), “Human Resource Accounting”, Distension publishing Co. Inc US.

Flamholtz Eric. G. (1971), “A Model for Human Resource Valuation: A stochastic process with service

Rewards”, The Accounting Review April.

Flamholtz Eric. G. (1999), “Human Resource Account Advances in Concepts, Methods and

Applications”; Third Edition, Kulwer Academic Publishers.

Fran Ferrier, Rob wells (1999), “Human Resource reporting some exploratory case studies in Australian

Enterprises” ,CEET working paper No 23.

Kalse Kenneth A. (1996), “Accounting for human Resource Development in the Public sector”,

International Journal of public Administration Vol. 19, Page 661-688.

Khatik S.K., Patra Ramakanta (2003), “International Journal of Human resource Development and

Management”, Vol.3.

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Likert Pensis (1973), “Human resource Accounting: Building and Assessing Productive organization”,

May.

Annual Report

Annual report of BHEL (2003-04 to 2007-08)

Annual report of SAIL (2003-04 to 2007-08)

Annual report of INFOSYS (2003-04 to 2007-08)

Annual report of ACC (2003-04 to 2007-08)

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