Changes in the accounting profession and in the way organizations are managed and operated over the past several decades have led to the identification of a new factor that makes up a substantial part of the value of an organization: human capital. The value that employees add to organizations, however, has been difficult to measure because of the many elements that comprise it and aspects of human nature and free will that are involved. Many models have been proposed to capture the value that organizations gain from employees, but none have succeeded in full. Additionally, strict financial reporting regulations would require an accurate and uniform method of accounting for human capital in order to give much relevance to the data collected. Despite its complex nature, the field of human asset accounting continues to gain momentum and is headed in the right direction. The development of a universal method of accounting for human capital would provide a much more exact valuation of organizations and have deep benefits for owners, managers, investors, accountants, and human resource employees. This paper examines the history of human asset accounting and its feasibility in current financial reporting environments. Additionally, it demonstrates the importance of human asset accounting, different approaches toward human asset accounting, and how beneficial an accurate method could prove to be in financial reporting. Finally, the paper recommends that, as a precursor to measurement, the development of general quantitative and qualitative human capital disclosures, with real company examples, be included in a companys sustainability reporting.
The pre-history of sustainability reporting: a constructivist reading