HR ACCOUNTING

The importance and value of human assets

started to be recognized in the early 1990s when
there was a major increase in employment in
firms in service, technology and other knowledgebased sectors
It was first promulgated by BHEL (Bharat Heavy
Electrical Ltd), a leading public enterprise, during
the financial year 1972-73.
Later it was also adopted by Hindustan Machine
Tools Ltd. (HMTL), Oil and Natural Gas
Corporation Ltd.(ONGC), NTPC, Cochin Refineries
Ltd. (CRL), Madras Refineries Ltd.(MRL),
Associated Cement Company Ltd.(ACC) and
Infosys Technologies Ltd.(ITL).

Definition of HRA:
According to Eric. G flamholtz HRA
represents-"Accounting for people as an
organizational resource. It is the measurement
of the cost & value of people for the
organization".
Models of Human Capital Valuation
Many models have been created to value
human capital. Some are based on historic costs
while some are based on future earnings. But each
has its own limitations and one model has proved to
be more valid than other. Although theLev and
Schwartz modelhas been the most widely use model
for its ease of use & convenience.

Use of the Lev and Schwartz Method to Value

HR in Infosys as follows :
All the employees of Infosys were divided into five
groups, based on their average age .Each groups
average compensation was calculated.
Infosys also calculated the compensation of each
employee at retirement by using an average rate of
increment.
The increments were based on industry standards,
and the employees performance and productivity.
Finally the total compensation of each group was
calculated. This value was discounted at the rate
percent per annum which was the cost of capital at
Infosys to arrive at the total human resources of
Infosys.
According to this report the worth of each Infosys
employee in 2011 is 75 lakhs and as per 2012 it is

Benefits experienced By Infosys by valuing its

human resources
a)Infosys could determine whether its human asset
was appreciating over the years or not
b)The company could also use this information
internally to compare the performance and
productivity of employees in various departments.
c)HRA also helped Infosys to decide the
compensation of employees. The company ensured
that it compensated each employee according to his /
her net worth.
d)HRA also helped Infosys in indentifying and
retaining valuable employees.
e)It helped organization to take managerial
decisions based on the availability and the necessity
of human resources.
f)When human resources get quantified it gave

REFERENCE :
http://www.infosys.com/investors/reports-filings/annu
al-report/annual/Documents/AR-2011/ai_13.html

THANKYOU !!!