Though Human Resource Accounting (HRA) plays an important role in picking up the overall value of an organization, unfortunately, a majority of the Indian organizations are neglecting this issue. If HRA is also considered as one of the individual valuation elements which deserve more importance and consideration, the value of the organization will be more than what is depicted by the traditional financial statement. This article aims to make readers aware of the details of various methods of valuation of Human Resources (HR).

In the modern industrial system, the productivity of any organization is the result of the combined efforts of all factors like men, material, machinery and money. Unlike other factors of production, Human Resource (HR) is an active factor and controls all other factors and coordinates them to get the maximum output at minimum cost. Human Resource Accounting (HRA) is not a new issue in the management field. Rensis Likert (Carme, BV and Soledad, MG, 1999 p. 386) initiated research into true HRA in the 1960s. He emphasized the significance of long-term planning of qualitative variables which results in greater benefits in the long run. The resources theory (Conner, 1991) considers HR in a more explicit way and states that the competitive position of a firm depends on its specific assets which are its HR. A talented team can make a firm more productive than others with the same technology (Carme, BV and Soledad, MG, 1999 p. 386). Numerous instances of such successful enterprises can be quoted. Unfortunately, the accounting profession has always neglected the contribution of these vital resources. It very easily ignores HR, though it recognizes physical property like buildings, production plants and machineries by showing them as assets on the balance sheet. The reason may be, in the past, it never bothered to recognize the contribution of HR in the success of an enterprise. However, in recent literature an attempt is being made to recognize the contribution of HR and promote it from the status of passing remarks to the status of an asset on the balance sheet of the organization. This has led the development of HRA.

In the past, organizations gave less importance to their human assets. Although some organizations measured their intangible assets, they did not include them in their annual report because they felt it was pointless, or because they were afraid of giving away too much information, or because there was no theoretical model for such reporting. However, Swedish companies have taken a lead in this respect by publishing statementsabout their HR in their annual reports as an addition to the conventional financial statements (Sveiby, 1997). In the field of intellectual capital measurement, Scandinavia has become a leader (Toulson and Dewe, 2004 p. 75).

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