This article traces out the evaluation of Human Resource Accounting (HRA) in India. The author has focused on its objectives and importance in Indian industries.

The assets of an organization could be broadly classified into tangible and intangible assets. While tangible assets refer to all the physical assets, intangible or intellectual capital is categorized into three classes:

Human resource is the most valuable asset in an undertaking. The first economist to formally consider people as an item of wealth, in micro economic aspect, was Sir William Petty. However, he did not define a specific aspect of human ability as capital. Theodose W Schutz concluded after realizing that technological advancement did not explain all the gains in productivity, that human factor and the skills acquired by it are the primary source of increased productivity.

In the past, Human Resources (HR) were never treated as an asset. It was considered difficult to value HR as there were no defined parameters of valuation. All investments related to employees were considered as expenditures. Accountants felt that the stakeholders may not accept the concept of placing a monetary value on HR.

The concept of Human Resource Accounting (HRA) is not new in India. HRA was pioneered by public sector companies like BHEL and SAIL back in the 1970s. However, the concept gained much popularity and acceptance in the mid 1990s when the service, technology and other knowledge-based sectors recognized the importance of the contribution by HR. In the financial year 1995-96, Infosys Technologies became the first software company to value its HR in India, followed by many other leading software companies.

Accounting World Magazine, Human Resource Accounting, Intellectual Capital, Human Resources, HR, Public Sector Companies, Bharat Heavy Electric Limited, BHEL, Generally Accepted Accounting Principles, GAAP, International Accounting Standards Committee, IASC, Institute of Chartered Accountants of India, ICAI, Accounting Standards Board , ASB, American Accounting Association, Decision-Making Process.