The HR is in the midst of a fundamental shift, from being a cost item on the balance sheet to being a partner to the profit center. With human capital boom and increasing contribution by knowledge workers to the world's economy, the HR is experiencing a sea change in its role as the strategic business partner. There had been a constant pressure to justify its Return On Investment (ROI). Now, there is an added responsibility to establish the highly intangible ROI from its intellectual assets. Although there are numerous advantages in developing measuring tools to establish the claims on the organization growth through HR effectiveness, there are various deterrents which need to be addressed in order to make Human Resource Accounting, a widespread practice. The Indian organizations are responding to this trend and are finding out ways to prove its worth of knowledge in actual numbers.

The past few decades have witnessed a global transition from manufacturing to service-based economies. The fundamental difference between the two lies in the very nature of their assets. In the former, physical assets like plant, machinery, material are of utmost importance. In contrast, for service industries like BPO and KPO, it is the human resources who contribute through knowledge skills and innovative capabilities. Similarly in hospitals, academic institutions and consulting firms, the standards are achieved through their human potential, their capabilities to handle other people. It is the people-friendly culture which facilitates optimum harnessing of human potential.

Human Resource Accounting (HRA) has developed methods to capture and quantify not only individual contribution but also the cost effectiveness of the organizational processes, like recruitment, selection, training, etc. Thus, HRA is a tool to find the economic value of human beings.

While furnishing the annual report, it is not mandatory to produce the cost of people as their investment. In most industries, it is a practice to announce the competitive contribution made by their human capital other than the financial, which is often made by the chairman, in the AGM. There are a few organizations that regularly recognize the value of their human resources, and furnish the related information in their annual reports. In India, some of these companies are: Infosys, Bharat Heavy Electricals Ltd. (BHEL), the Steel Authority of India Ltd. (SAIL), the Minerals and Metals Trading Corporation of India Ltd. (MMTC), the Southern Petrochemicals Industries Corporation of India (SPIC), the Associated Cement Companies Ltd., Madras Refineries Ltd., the Hindustan Zinc Ltd., Engineers India Ltd., the Oil and Natural Gas Commission, Oil India Ltd., the Cement Corporation of India Ltd., etc.

Accounting World Magazine, Human Resource Accounting, Indian Organizations, Knowledge Processing Outsourcing, KPO, Physical Assets, Business Process Outsourcing, BPO, Organizational Processes, Organizational Resources, Intellectual Asset Valuation, Operational Systems, Tangible Assets.