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This study critically examined human resources accounting as a tool for measurement of human capital in Access Bank of Nigeria Plc, from 2003 to 2012. Using the ordinary least square analytical technique, secondary data from Access Bank of Nigeria Plc were obtained. Findings revealed that there is a positive relationship between the indicators of human resource cost (training cost, development cost and number of staff) and the profit of the organization (Access Bank Plc). It was also discovered that there was a significant relationship between training cost, development cost and the profit of the bank. However, the number of staff does not have a significant effect on profit of the bank. Nonetheless, organizational performance is dependent upon the performance of the individuals that make up the organization. That is, organization does not exist in a vacuum; there are people (employees) who may work together towards achieving its goal. It was therefore recommended inter alia that; organization should enhance the retention of education and training on staff so as to avert wastage of knowledgeable investment. Also, accounting standard board should incorporate their accounting standard for the valuation and disclosure of human resource accounting.






1.1   Background to the study

Human Resource is a term which refers to the set of individuals who make up the workforce of an organization or a business entity. According to Syed (2009), it comprises the energies, skills, talents and knowledge of people which are, or which potentially can be applied to the production of goods or rendering useful services. The success of any organization depends on the ability of the human resources to effectively and efficiently optimize other resources such as land, equipment and money hence human resources are the greatest assets at the disposal of businesses.

Today’s high dependency on information and communication technology has indeed made the world a global village. This eventually led to the transformation of the world’s economy from industrial economy to post industrial economy. According to Flamholtz (1999), there is growing recognition that over the past few decades, most of the world’s advanced economies have made a gradual yet fundamental transformation. They have shifted from industrial economies where plant and equipments were the core assets, to post-industrial economies where intellectual property, specifically human capital, is the core asset.

Business organizations now spend enormous sums of money and spare no effort in selecting, training, re-training and developing their managers to equip them adequately to meet the challenging tasks arising from internal and international developments. The increasing technical complexity of modern business and the time required for personnel to gain skills, and experience and judgement in many vital areas makes brain power the critical resource in our economy.

Financial analysis stresses the quality of management behind the business more than any other factor in evaluating diversification and takes over propositions. All these arise from the increasing recognition that human resources are the most important business assets. We recognize that people are valuable to business enterprises, universities, hospitals and perhaps, all organizations. We know that the value of human resources is derived from their ability to render services which have economic value.

Human Resource Accounting (HRA) provides useful information to both internal and external users of accounting information. It helps internal users (like management) in making decision on employment and utilization of human resources and also in deciding transfers, promotion, training and retrenchment of human resources. It provides a basis for the planning of physical assets vis a vis human resources, as well in evaluating the expenditure incurred for imparting further education, training and development in employees in terms of the benefits derived by the firm, among others. For external users (such as potential investors), HRA provides useful information for making investment decisions.

Mayo (2006) posits that people are often spoken of as assets, but are generally treated as cost because there is no credible system of valuing them.

Marshal (1961) had also said that the most valuable of capital is that invested in human beings.

This is why the statement “our greatest assets are our people” is declared in most companies’ annual reports (Enofe, Sunday & Ovie, 2013). The work of Bassey and Tapang (2012) points to the fact that human resources have been identified as one of the main sources of competitive advantage by many organizations in today’s economy. Particularly, the private sector organizations are widely diverse and has focused on human resources as having special strategic value for organization development. Abdullahi and Kirfi (2012) maintain that the quantification of the value of Human Resources helps the management to cope up with the changes in its quantum and quality so that equilibrium can be achieved in-between the required resources and the provided human resources. As a result, it becomes imperative to put measures in place to effectively manage people with their needs and expectations to enhance productivity. Therefore, proper appreciation of human resource accounting will enable managers take appropriate decisions regarding investment in human resources. It will also provide comparative information regarding costs and benefits associated with investments in human assets.

It is a truism that information as to human asset has not been noticeable and presented on the financial statement of organizations and it makes it difficult to measure or evaluate the real profit of a firm. The growing trend towards the measurement and reporting of human asset in corporate annual reports is particularly not noticeable in the financial report of corporate organizations.  Corporate organizations, by charging expenses of recruitment, training, familiarization and development of human resources to the current period’s profit or loss account, understate profits or overstate losses, by not accounting for expenses related to human resources, even when they substantially conceal asset and net worth.

Though the idea of accounting for human resources started many years back, the concept still lacks general acceptability. Many authors and scholars have conducted researches on how humans within an organization can be valued and reported in the financial statements of such organization. Human resource accounting and reporting by corporate organizations is still at the infant stage in Nigeria. One of the companies that have invested heavily in human resources and have applied human resources accounting in one way or the other is Access Bank Plc, amongst others. Access bank Plc in 2007 commenced construction of Access Bank Campus otherwise called Access University of Banking Excellence. These heavy investments to train and retrain quality staff are not reflected in the balance sheet of these various organizations. Indeed, they are charged against revenue for the period to reduce income and by extension the value of the business. The investments by this company in human capital development are normally not reflected in their balance sheets as assets but expensed in the profit or loss account.

Therefore, this study examines human resources accounting as a tool for measurement of human capital


1.2   Statement of the problem

If human capital is, in real sense, “best practice”, why is it that some organization lack human capital resources processes yet are successful in their purpose? Or, put another way, why doesn’t everyone adopt human capital principle? A simple answer would be that such firms may be successful now, but the possibility of their sustaining their success is reduced by their failure to implement human capital concepts.

The important of human resource to any organization cannot be over emphasized. But the human resources accounting is ridden with many controversy. It has two equal sides one for and the other against.

For the school of thought against its inclusion in the financial statement, considering human as assets has become morally repulsive follow the abolition of slavery, Mayo (2004). They also hold that human resource does not meet the requirement for it to quality as assets, these criteria is derived form the definition of assets are resources owned or controlled by an entity as a result of past events from which future benefits will accrue to the entity. From the above definition, human resource cannot be owned as the employee can decide to take another job elsewhere without notice; he can also decide to acqure another skill and change his job entirely. Lastly the determination of the value of the human resources to the organization. Those clamouring for the inclusion of human resources in the assets of an organization hold that human resources are the most important of all the resource of an organization. The economists are one such people that believe human resource should be recognized as asset and should be reflected in the statement of financial position of an organization.

They further state that, since assets is considered as any expenses which benefits is derived beyond one financial year, human resources meet this condition and should be recognized as one. Williams (2001) is of opinion that firms perform better when the value of their human capital are recognized and are carried as assets in the statement of financial position. In conclusion they accepted that human resources are not like other physical assets, which can be bought and sold.

The major challenges encountered in the recognition of human resources as an asset rest largely on its characteristics, quantification in monetary terms and the method of reporting. Thus the research seeks to clearly elucidate the impact of human resource accounting on the profitability of a firm.


1.3   Objective of the study

The main objective of the study is to critically examine the human resources accounting as a tool for measurement of human capital.

The specific objectives are:

  1. To examine the effects of staff training costs on the profitability of Access Bank PLC.
  2. To examine the effects of staff development costs on the profitability of Access Bank PLC.
  3. To examine the effects of increment in number of staff on the profitability of Access Bank PLC.


1.4   Research Questions

  1. What are the effects of staff training costs on the profitability of Access Bank PLC?
  2. What are the effects of staff development costs on the profitability of Access Bank PLC?
  3. What are the effects of increment in number of staff on the profitability of Access Bank PLC?


1.5   Research Hypothesis

Ho1:   There is no significant relationship between staff training costs and the profit of Access Bank PLC.

Ho2:   There is no significant relationship between staff development costs and the profit of Access Bank PLC.

Ho3:   There is no significant relationship between increment in staff and the profit of Access Bank PLC.


1.6   Significance of the study

At the end of this study, the banking sector will learn how to utilize its human resources to the maximum advantage. Also, the findings of this study will enable the captains of banking industry to be sensitive to the need of the human resources and also to adopt strategy to decide effective leadership in order to optimally utilize their human resources.


1.7   Scope of the study

The study is carried out on human resources accounting as a tool for measurement of human capital. It is therefore limited to Access Bank PLC.


1.8   Organization of the study

The study is divided into five chapters. Chapter one deals with the study’s introduction and gives a background to the study. Chapter two reviews related and relevant literature. The chapter three gives the research methodology while the chapter four gives the study’s analysis and interpretation of data. The study concludes with chapter five which deals on the summary, conclusion and recommendation.


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