Human value inclusion in financial statements: Boost or waste

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Abstract

Most organizations refer to their human resources (HR) as a significant value-creating asset but fail to recognize them in financial statements. Further, the financial accounting domain operates without a unique accounting standard for human value inclusion (HVI) in the financial statements. Moreover, comprehensive empirical studies in this area are hard to find. Therefore, the present case study attempts to find whether the inclusion of human capital in financial statements has an impact on financial performance and if so, which valuation model is a more appropriate, historical cost (HC) or present value (PV). The paired samples t-test method was employed to analyze 10-year data (2010–2019) and it is revealed that the inclusion of human capital in financial statements in the PV model might enrich the financial performance of a firm. These findings could inspire the administrators of professional bodies of accounting to initiate a distinct accounting standard to recognize HR in financial statements.

Keywords: Accounting Standards, Financial Statements, Human Resources, Human Value Inclusion, Human Resource Accounting

Authors’ individual contribution: Conceptualization — N.N.; Methodology — N.N., N.M., and Y.U.; Investigation —Y.U.; Formal Analysis — N.N., N.M., and Y.U.; Writing — Original Draft — N.M. and Y.U.; Writing — Review & Editing — N.N.; Supervision — N.N.; Project Administration — Y.U.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

JEL Classification: J54, M4, M10, O15

Received: 17.08.2022
Accepted: 18.11.2022
Published online: 21.11.2022

How to cite this paper: Nagalingam, N., Madhavika, N., & Umashangar, Y. (2022). Human value inclusion in financial statements: Boost or waste. Corporate Ownership & Control, 20(1), 87–94. https://doi.org/10.22495/cocv20i1art8