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ABSTRACT: The crux of the study was to examine the impact of human resource accounting on the profitability of 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 (Manufacturing industry). 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.






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. This is why the statement “our greatest assets are our people” is declared in most companies’ annual reports.

Human resource accounting is the process of identifying and measuring data about human resources and communicating this information to interested parties. Okpala & Chidi (2010), explain that human resource accounting relates to the quantification in monetary terms of human resources employed by an organization and assert that a well-developed system of human resource/capital accounting could contribute significantly to internal decisions by management and external decisions by investors.

Human resource is one of the intellectual assets of an organization. The new essence of human resource management is strategic. With rapid changes in the business environment, organizations are now increasingly looking at intellectual capital and by extension human resources as the unique asset that can drive superior performance. The strategic utilization of human resources can produce a constant stream of improvements in all aspects of customer value in terms of quality, functionality and timely delivery, while lowering cost at the same time, thereby achieving ‘continuous improvement’ for the organization. In strategic management accounting, the learning curve effecthelps reduce labour cost directly, while other costs connected to labour (e.g. material cost) are also incidentally reduced.

The effective and efficient use of the physical assets largely depends on the skills, ability, quality, perception and character of the employees (Knauf, 2011). America Accounting Association (2003) define Human Resource Accounting (HRA) as the process of identifying and measuring data concerning human resource and communicating this information to interest parties. Historically, human resource accounting was first proposed in the 2000’s in the attempt of including employees on the balance sheet and it became a known topic of research in the 2000s.

Flamholz (2009) states that HRA has main roles; to encourage decision makers to accept HRA and to provide firms with information concerning the cost of employees. In spite of research in this area, HRA is not widely accepted in practice due to some reasons. These include questions as to whether it is proper to measure employees, whether employee can be measure as an asset.

Training employees is part of human resources framework. Firms also has to leverage the capabilities and skills of its employees by encouraging individual learning and creating a helpful environment in which knowledge can be created shared and applied firms goals (Appah, Tebepah and Soreh, 2012). Performance of firm measure the percentage of turnover resulting from firm products, return on asset (ROA), return on equity (ROE) and earning per share (EPS).

The work of Bassey & 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 organization is widely diverse and has focused on human resources as having special strategic value for organization development. Abdullahi & 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 informationregarding costs and benefits associated with investments in human assets.

1.2 Statement of Problems

Though the idea of accounting for human resources started many years back, the concept still lacks general acceptability (Bowers, 2003). 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.(Schulz, 2001; Hermannson, 2004; Likert, 2007; Bowers, 2003; Flamholz, Bullen & Hua, 2002).

Human resource accounting and reporting by corporate organizations is still at the infant stage in Nigeria. Some of the companies that have invested heavily in human resources and have applied human resources accounting in one way or the other in Nigeria include Unilever Plc, Nigeria Breweries, Cadbury Nigeria Plc, Nestle Foods Nigeria Plc, Access Bank Plc, Zenith Bank Plc, amongst others. The investments by these companies in human capital development are normally not reflected in their balance sheets as assets but expensed in the profit and loss accounts. (Okapla & Chidi, 2010; Micah, Ofurun & Ihendinihu, 2012). 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.

1.3 Objectives of the study

The general objective of this research is to assess the impact of human resources accounting practices on the performance of manufacturing industries in Nigeriawith particular reference to Nigerian Brewery Plc 9th mile Conner Enugu, the specific objectives of this research work includes the following;

  1. To examine the effect of human resources accounting on the performance of manufacturing companies in Nigeria.
  2. To examine the extent at which human resources accounting contributes to the development of Nigerian industrial sector.


  1. To examine the relationship between human resource accounting and the financial performance of Nigerian manufacturing companies.
  2. To identify the challenges of human resource accounting disclosure in Nigerian manufacturing companies. And also proffer possible solutions to the problems identified.

Research hypothesis

To guide the researchers in achieving this objective, the following hypotheses were formulated:

Ho1: There is no significant relationship between staff training costs and the profit of Manufacturing industry.

Ho2: There is no significant relationship between staff development costs and the profit of manufacturing industry.

Ho3:                 There is no significant relationship between increment in staff and the profit of manufacturing industry.


Significance of the Study

The wide increase in the number of service companies globally where personnel knowledge, skills, expertise and experience are the key to their success makes the human resource accounting a necessity. Organisations do report on capital and other assets in their performances but reporting nothing regarding human resource except as a charge in their income statements. Money spent on hiring, recruiting, training and developing human resources are expensed rather than capitalised. Nowadays, the amount invested by organisations on human resource is very huge and calls for a better way of reporting. The financial information contained in the financial statements of organisations is considered inadequate because of many reasons, which inability to account and report human resource is one.



Human Resource Accounting is relatively a virgin area in accounting and yet to be applied in Nigeria (Kodwani & Tiwari, 2007). This study looks at the possible application of the concept in the performanceing of the quoted Nigerian service companies. Although some Nigerian researchers attempted to unveil the philosophy and epistemology of Human Resource Accounting, none is yet to bring out the possible ways of applying it in the performanceing of Nigerian service companies. In this regard, the study develops a model that could be acceptable and applicable locally, which could stimulate international application of a standard method of valuing human resource working in service-oriented companies.

By and large, the study is expected to assist the Performanceing Council in Nigeria (formerly Nigerian Accounting Standards Board) to adopt a standard measure for valuing human resource for inclusion in the financial statements of organisations. Adoption of a standard way of accounting human resource will increase the acceptance and application of the system by reporting organisations. Secondly, it is expected that the study will assist the

various users of financial statements in their analysis and interpretation of service companies’ financial statements for informed decision making since they would have access to more useful information than before. Lastly, the study can assist the management of the reporting organisation to put more effort toward the development of their human resource.

Scope of the Study

This study is limited to the human resource found in the profit-making quoted service companies in Nigeria. As such, personnel found in the manufacturing-oriented organisations and those working with government, at any level, and its agencies are excluded. The reason behind this delimitation is because of the sensitivity of human resource in the success of profit-motive service organisations and the attention that such organisations usually give to their employees or human resource.


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