Description
This study dealt with the effect of human resource accounting on financial statement of Nigerian Bank using Zenith Bank Plc as a case. The main objective of this Study is to determine whether accounting for human resources will influence the financial position of Zenith Bank Plc and to examine if the non-application of Human Resource Accounting measures, affect future investment of Zenith Bank Plc in human capital.
International Journal of Advancements in Research & Technology, Volume 2, Issue 8, August-2013 342
ISSN 2278-7763
Copyright © 2013 SciResPub. IJOART
Effect of Human Resource Accounting (HRA) on Financial
Statement of Nigerian Banks
1
Ijeoma, N.,
2
Aronu, C. O.
1
Department of Accounting, Nnamdi Azikiwe University, Awka, Nigeria,
2
Department of Statistics, Nnamdi Azikiwe University, Awka, Nigeria.
Email: [email protected]
ABSTRACT
This study dealt with the effect of human resource accounting on financial statement of Nigerian Bank using Zenith Bank Plc as
a case. The main objective of this Study is to determine whether accounting for human resources will influence the financial po-
sition of Zenith Bank Plc and to examine if the non-application of Human Resource Accounting measures, affect future invest-
ment of Zenith Bank Plc in human capital. The method of data collection used in this study is field survey method which in-
volved the use of questionnaire and interview. From result of the Kruskal Wallis test statistic used in analysing the data collected
it was observed that accounting for human resource will improve the financial position of Zenith Bank Plc if applied. Equally,
Non-application of human resource accounting measures was found to affects the future investment of Zenith Bank Plc. Also, it
was concluded that accounting system in Zenith Bank Plc is still based on an industrial paradigm where only fixed assets such
as land, buildings, and motor vehicles are considered assets, such that every naira spent on training and or development of em-
ployees are treated as expenses which affects the profitability of the firm.
Keywords: Investment, Zenith Bank, Asset, Capital, System, Employees, Questionnaire
1 INTRODUCTION
ur main asset is our people” How true is this often re-
peated statement made by management of organiza-
tions? The success or otherwise of an organization de-
pends on how best the scarce physical resources are utilized
by the human resource. What is important here is that the
physical resources are being activated by the human resources
as the physical resources cannot act on their own. In spite of
the important role played by human resources in organiza-
tions, accounting is still based on an industrial paradigm in
which only physical and tangible property is considered asset.
It is in the light of the above that accountants began research
into the area of Human Resource Accounting (HRA). Alt-
hough, it is relatively a new field, its development has already
passed through several discernible stages. The first stage of
development from 1960 to 1966 was marked by interest in
human resource accounting and the derivation of the basic
HRA concepts from related bodies of theory. The initial impe-
tus for the development of HRA came from a variety of
sources including; the economic theory of human capital, or-
ganizational psychologists’ concern for leadership effective-
ness, and a concern for human assets as components of corpo-
rate goodwill. [1], believes that the human resource is the most
vital part of any organization, as it makes sure there exists a
symbiosis between financial and all other physical resources
towards the achievement of organizational objectives and
goals. Conveniently, financial assets are accounted in the
books of accounts as per the general principles of accounting,
but does not account for the human asset. Although many
efforts have been made by many thinkers in this area, prop-
er/appropriate and fully validated model of performance
based on human resource accounting is not yet available.
However, some authors have been able to put writings in the
area. Human Resource Accounting is a process of identifying
and measuring data about human resource and communi-
cating this information to interested parties. Therefore, it is an
attempt to identify and report investment made in resources
of an organization that are not presently accounted for under
conventional accounting practices. Moreover, human resource
accounting helps to measure the value of employees, which
helps the management take vital decisions related to human
resources in order too increase production. It requires the
measurement of the performances of an organization and the
optimum use of the resources under the direct and indirect
control. Hence, the overall valuation is important for decision-
making in order to achieve the organizational objectives and
improve the output. According to [2] HRA aims at depicting
the human resources potential in money terms while casting
the organization’s financial statements.
The traditional accounting procedures which have been prac-
ticed since long have come to stay as acceptable norms. As a
result whenever a new accounting system is developed, it is
pitted against the strength of the traditional system, which is
considered to be comparatively objective and free from any
bias. [3], expressed that human measures is the profit lever of
the knowledge economy. [4], argues that employees interact
together and transform other resources of the organization so
as to add value and that what results from this transformation
is reflected in the profit of the organization. He further posits
that high priority and constant appraisal need to accrue to
human resources as increased moral will result to better trans-
formation and higher reflection of profit. In their contribution,
[5] concluded that human resource accounting can be used as
a political tool to demonstrate mismanagement of human re-
sources, this is a situation which could negatively impact on
O
IJOART
International Journal of Advancements in Research & Technology, Volume 2, Issue 8, August-2013 343
ISSN 2278-7763
Copyright © 2013 SciResPub. IJOART
performance and consequently on profit. Also, they added
that it could be used as a pedagogical instrument for analyz-
ing and structuring and thus better understanding, personal
problem from the applied perspective and thus being better
able to balance applied values against other values.
In spite of these views and findings, human resource of an
organization is yet to be recognized in the balance sheet. Audi-
tors make a true and fair opinion on the financial statements
despite the fact that it does not reflect the values of these ‘soft
asset’ often referred to as our greatest assets. Shouldn’t this
traditional valuation be called into question as human capital
is an increasingly important part of an enterprise’s total value?
This practice seems to have negative effect on the competitive
position of an organization. It could equally hamper the per-
formance of the employee ([4]; [5]). This traditional practice
could again influence the financial position of an organization.
The current accounting system has not been able to provide
the actual value of employees’ capabilities, knowledge and
experiences. This seems to indirectly affect future investments
of a company as each year the cost on human resource devel-
opment and recruitment increases. Haven’t the Accounting
Standard Setters seen the need to legislate HRA or do they see
it as lacking symmetry with traditional resource. All these are
the worries of this present study. It is against this backdrop
that this research work intends to make a formal study on
these issues with a view to proffering solution. Hence, this
study tends to access the effects of human resource accounting
(HRA) in financial statements in order to discover its signifi-
cance on the position of Nigerian Banks using Zenith Bank Plc
Nigeria as a case.
1.1 Managerial Accounting Perspective of HRA
[6], suggested that the value of human capital should be more
fully considered when making decisions about the acquisition
and disposal of people and noted that the accounting practices
currently employed by companies can have an undue influ-
ence in driving the strategic decisions of these companies. He
also noted that there are parallels between the process of ac-
quiring an employee (a human capital asset) and that of ac-
quiring a fixed capital asset. However while most companies
acknowledge the contributions of its employees, they do not
think of the acquisition or disposal of human capital assets in
the same way or with the same thoughtful planning or strate-
gic thinking as they do fixed capital assets. According to [7]
utilized the HRA measure of expected realizable value, and
found that employees’ participation in a management devel-
opment program increased the value of the individuals to the
firm. In addition he noted that the HRA measures provided
upper level management with an alternative accounting sys-
tem to measure the cost and value of people to an organiza-
tion. Thus HRA represented either a paradigm or way of view-
ing human resource decisions, and the set of measures for
quantifying the effects of human resource management strate-
gies upon the cost and value of people as organizational re-
sources. [8], indicated that too many business leaders have no
generally accepted definition or accounting procedure for
tracking training investments, and stated that a lower training
investment is not automatically better for an overall return on
investment. [9], reported that expressing human resource in-
terventions in financial terms and or cost benefit terms is more
effective than using soft accounting information such as data
on job satisfaction. Because the classical function of accounting
is the determination of the value of the economic activity, per-
forming analysis with hard numbers such as cost-benefit anal-
yses helps us determine how resources should be used by
human resources for various interventions. In their view, [2],
opined that, personnel working for a determined enterprise
are actually participating in a value creation process. That is,
any economic activity makes the firm incur cost. One tradi-
tional classification takes into account the cost categories of
raw materials, industrial plants, and personnel. They further
explained that, when adding income flow to an organization’s
market, goods and services, if it is superior to the cost flow, it
becomes value added. This value is a consequence of the inter-
action between materials and human resources in production.
2 MATERIAL AND METHODOLOGY
2.1 Data Collection
The method of data collection used in this study is field survey
method; this involved the use of questionnaire and interview.
The purpose is to give a clear understanding of the concept of
human resource accounting in an organization. The study co-
vers the two branches of Zenith Bank Plc in Awka Town. The
total population of study was 49 staff and a random sample of
43 staff was drawn from the branches of Zenith bank Plc in
Awka. This includes both management and administrative
staff of the bank. The statistical tool used in analysing the data
was the Kruskal Wallis Test with aid of SPSS 17.0 Package.
2.2 Data presentation (see Appendix)
2.3 Research Hypotheses
H01: Accounting for human resources does not improve the
financial position of Zenith Bank Plc.
H11: Accounting for human resources improves the financial
position of Zenith Bank Plc.
H02: Non-application of human resource accounting measures
does not contribute significantly to the future investment of
Zenith Bank Plc
H12: Non-application of human resource accounting measures
contributes significantly to the future investment of Zenith
Bank Plc
H03: Accounting for human resource will not improve employ-
ees’ performance
IJOART
International Journal of Advancements in Research & Technology, Volume 2, Issue 8, August-2013 344
ISSN 2278-7763
Copyright © 2013 SciResPub. IJOART
H13: Accounting for human resource will improve employees’
performance
3.0 DATA ANALYSIS AND RESULT
3.1 Kruskal-Wallis Test for testing that accounting for
human resources does not improve the financial posi-
tion of Zenith Bank Plc
Tabl e 4: Ranks
Options N Mean Rank
Response 1 1.00 8 28.44
2.00 8 19.00
3.00 8 6.31
4.00 8 12.25
Total 32
Tabl e 5: Test Statisti cs
a,b
Response 1
Chi-Square 24.999
df 3
Asymp. Sig. .000
a. Kruskal Wallis Test
b. Grouping Variable: Options
3.2 Kruskal-Wallis Test for testing that Non-application
of human resource accounting measures does not con-
tribute significantly to the future investment of Zenith
Bank Plc
Tabl e 6: Ranks
Options N Mean Rank
Response 2 1.00 8 28.50
2.00 8 20.44
3.00 8 8.31
4.00 8 8.75
Total 32
Tabl e 7: Test Statisti cs
a,b
Response 2
Chi-Square 26.354
df 3
Asymp. Sig. .000
a. Kruskal Wallis Test
b. Grouping Variable: Options
3.3 Kruskal-Wallis Test for testing that accounting for
human resource will not improve employees’ perfor-
mance
Tabl e 8: Ranks
Options N Mean Rank
Response 3 1.00 8 27.31
2.00 8 21.06
3.00 8 7.69
4.00 8 9.94
Total 32
Tabl e9: Test Stati sti cs
a,b
Response 3
Chi-Square 23.669
df 3
Asymp. Sig. .000
a. Kruskal Wallis Test
b. Grouping Variable: Options
4 DISSCUSSION
It was observed from Table 5, that accounting for human re-
sources improve the financial position of Zenith Bank Plc,
since a Chi-square of 24.99 was obtained and a corresponding
IJOART
International Journal of Advancements in Research & Technology, Volume 2, Issue 8, August-2013 345
ISSN 2278-7763
Copyright © 2013 SciResPub. IJOART
p-value of 0.000 which falls on the rejection region of the hy-
pothesis assuming a 95% confidence interval level (p-value =
0.00 < ?=0.05). Also, Table 4, showed that majority of the re-
spondents Strongly Agreed (1) and Agreed (2) that accounting
for human resources can improve the financial position of
Zenith Bank Plc with a corresponding mean rank of 28.44 and
19.00 respectively. Table 7, showed that non-application of
human resource accounting measures contributes significantly
to the future investment of Zenith Bank Plc, since a Chi-square
measure of 26.35 and a p-value of 0.00 was obtained. Hence,
the null hypothesis was rejected since the Chi-Square measure
of 26.35 is large and the p-value= 0.00 is less than the ?=0.05.
Also, Table 6, showed that majority of the respondents Strong-
ly Agreed (1) and Agreed (2) that non-application of human
resource accounting measures contributes significantly to the
future investment of Zenith Bank Plc with a corresponding
mean rank of 28.50 and 20.44 respectively. In addition, a Chi-
Square measure of 23.66 and a p-value of 0.00 was obtained on
Table 9, this result implies that accounting for human resource
will improve employees’ performance. Since, Chi-Square
measure of 23.35 is large and the p-value= 0.00 is less than the
?=0.05, thus the null hypothesis was rejected. Also, Table 8,
showed that majority of the respondents Strongly Agreed (1)
and Agreed (2) that accounting for human resource will im-
prove employees’ performance with a corresponding mean
rank of 28.50 and 20.44 respectively.
5 CONCLUSIONS
The issue of accounting for human resource accounting has
continued and will continue to fuel discourse in our nation
and globally. Based on the discussions of findings, the study
concludes that accounting for human resources will affect the
organization positively in general and also affect the employ-
ees in particular. The finding implies that accounting system
in Zenith Bank Plc is still based on an industrial paradigm
where only fixed assets such as land, buildings, and motor
vehicles are considered assets, such that every naira spent on
training and or development of employees are treated as ex-
penses which affects the profitability of the firm. Hence, we
recommend the need for banks stop considering every naira
spent on training and development of employees as expenses
to be minimized. Also, by application of human resource ac-
counting measures, we strongly believe that employees will
improve on their performance since they know that their con-
tributions and performance will be assessed and valued at the
end of the accounting period in this vein we suggest that man-
agement should embark on long-term planning exercise which
will help them to identify a potential lay-off decision that
might have long-term effects on the organization.
REFERENCES
[1] Narayan, R. “A New Paradigm in the Era of Globalization”. Asian
Journal of Management Research, 2010, pages 237-244.
[2] Parameswaran, R. and Jothi, K. “ Human Resource Accounting”. The
Chartered Accountant Journal, 2005, 53(7): 867-874.
[3] Gul, A. “An empirical study of the usefulness of human resource turn-
over costs in Australia Accounting firms”. Journal of Accounting, organiza-
tion and Society 1984; 5-11.
[4] Steven, H.A. and Hannie, H. “Accounting for Human Resources”.
Manager Auditing Journal, 1993, 8(2) : 23-27.
[5] Grojer, J. and Johansson, U. “Current Development in Human Re-
source Costing and Accounting”. Accounting, Auditing and Accounta-
bility Journal, 1998,11(4): 495-506.
[6] Moore, R. “Measuring How ‘Human Capital’ Appreciates in Val-
ue over Time”. Plant Engineering, 2007, 61(4): 29-30.
[7] Bullen, M.L. “Human Resource Accounting: A useful Tool for
Measurement and Management in Organizations”. Leadership and
Organizational Management Journal, 2007, 5: 85-103.
[8] Davidove, E. A., and Schroeder, P. A. “Demonstrating ROI of
Training”. Training and Development Journal, 1992, 46(8): 70-71.
[9] Johanson, U. and Mabon, H. “The Personnel Economics Institute
after Ten Years: What has been Achieved and where we are we go-
ing?” Journal of Human Resource Costing and Accounting, 1998, 3(2)
: 65-76.
IJOART
International Journal of Advancements in Research & Technology, Volume 2, Issue 8, August-2013 346
ISSN 2278-7763
Copyright © 2013 SciResPub. IJOART
Appendix
Table 1: Distribution of Responses on whether Accounting
for Human Resources improve the financial position of Zen-
ith Bank Plc.
S
/
N
QUESTIONS S
A
(
1
)
A
(
2
)
S
D
(
3
)
D
(
4
)
T
ot
al
1 Expensing values of human
capital development/training
might lead to lower invest-
ment consequently leading
to lower return on invest-
ment.
3
0
6
2
5
4
3
2 When the cost of HR is
capitalized like other physi-
cal assets, the profitability
position will improve which
will in turn enhance the
market value of the firm
2
3
1
0
0 1
0
4
3
3 Inclusion of human resource
in the financial statement
will make the organization to
be valued at its true poten-
tial
2
5
1
2
3
3
4
3
4 The assets of an organiza-
tion as measured within the
conventional accounting is
not a complete reflection of
the organization’s asset
3
5
5
0 3
4
3
5 The true financial position of
the organization can only be
ascertained when the hu-
man resource asset is in-
cluded in the balance sheet
1
5
1
0
8
1
0
4
3
6 Accounting for human re-
source will improve the fi-
nancial position of the firm
3
2
8
0
3
4
3
7 Treating human resource as
expenses to be minimized
distort the financial state-
ment.
2
5
1
0
3
5
4
3
8 Application of HRA
measures would aid man-
agement to acknowledge
the fact that investments in
a company’s human re-
source will result in long-
term profit for the organiza-
tion; thus enhancing the
financial position
2
2
1
5
3
3
4
3
Table 2: Distribution of Responses on the contributionof
Non-Application of Human Resource Accounting on the
future investment of Zenith Bank Plc
S/
N
QUESTIONS S
A
(1
)
A
(2
)
S
D
(
3
)
D
(4
)
To-
tal
1. Treating human resource as expenses
would make management to always
want to minimize investment in this
area.
3
0
8
3
2
43
2. If human resource is treated as asset it
will encourage management to invest
more on it.
2
0
1
4
5
4
43
3. Treating human resources as expenses
will reduce the training and develop-
ment exercise of an organization in
order to reflect higher profit in the Profit
& Loss account
2
6
1
1
3
3
43
4. Expensing HR would eventually reduce
skills and competence in the organiza-
tion
2
2
1
6
3
2
43
5. Non-investment in human capital would
lead to qualified labour force turnover.
2
0
9
8
6
43
6. Career development in an organization
would reduce if human capital is always
expensed.
3
2
9
1
1
43
7. Application of HRA measures would aid
management to make decisions that
treat the company’s employees as
long-term investment of the company.
3
0
9
1
3
43
8. With the use of HRA measures man-
agement is better likely to see the hid-
den cost in a potential lay-off decisions.
3
0
9
1
3
43
IJOART
International Journal of Advancements in Research & Technology, Volume 2, Issue 8, August-2013 347
ISSN 2278-7763
Copyright © 2013 SciResPub. IJOART
Table 3: Distribution of Responses on effect of Accounting
for Human Resource on improvement of employees’ per-
formance
S
/
N
QUESTIONS S
A
(
1
)
A
(
2
)
S
D
(
3
)
D
(
4
)
T
ot
al
1
.
Some firms are more productive
than others in almost similar condi-
tions as a result of approach and
competence.
3
0
1
1
0 2
43
2
.
Investment in human resource
capital influences directly or indi-
rectly the human resources and
the productivity of the organization.
2
8
1
0
2
3
43
3
.
Long-term planning of human re-
sources can lead to greater bene-
fits in the long-run.
2
5
1
5
1
2
43
4
.
The success of an organization
wholly depends on the quality of its
human resources.
1
0
1
5
1
1
7
43
5
.
Given the same physical assets
and similar technology, the quality
of human resources is what will
account for difference in perfor-
mance of two different organiza-
tions.
3
1
1
0
0 2
43
6
.
The quality of human resource
capital has direct impact on the
overall productivity of the firm
3
0
1
1
1
1
43
7
.
Human resource accounting is a
panacea for optimum performance
of employees of an organization
1
5
1
8
3
7
43
8
.
Investments in human resources
are considered essential in terms
of quality customer service deliv-
ery.
2
5
1
0
3
5
43
IJOART
doc_166201666.pdf
This study dealt with the effect of human resource accounting on financial statement of Nigerian Bank using Zenith Bank Plc as a case. The main objective of this Study is to determine whether accounting for human resources will influence the financial position of Zenith Bank Plc and to examine if the non-application of Human Resource Accounting measures, affect future investment of Zenith Bank Plc in human capital.
International Journal of Advancements in Research & Technology, Volume 2, Issue 8, August-2013 342
ISSN 2278-7763
Copyright © 2013 SciResPub. IJOART
Effect of Human Resource Accounting (HRA) on Financial
Statement of Nigerian Banks
1
Ijeoma, N.,
2
Aronu, C. O.
1
Department of Accounting, Nnamdi Azikiwe University, Awka, Nigeria,
2
Department of Statistics, Nnamdi Azikiwe University, Awka, Nigeria.
Email: [email protected]
ABSTRACT
This study dealt with the effect of human resource accounting on financial statement of Nigerian Bank using Zenith Bank Plc as
a case. The main objective of this Study is to determine whether accounting for human resources will influence the financial po-
sition of Zenith Bank Plc and to examine if the non-application of Human Resource Accounting measures, affect future invest-
ment of Zenith Bank Plc in human capital. The method of data collection used in this study is field survey method which in-
volved the use of questionnaire and interview. From result of the Kruskal Wallis test statistic used in analysing the data collected
it was observed that accounting for human resource will improve the financial position of Zenith Bank Plc if applied. Equally,
Non-application of human resource accounting measures was found to affects the future investment of Zenith Bank Plc. Also, it
was concluded that accounting system in Zenith Bank Plc is still based on an industrial paradigm where only fixed assets such
as land, buildings, and motor vehicles are considered assets, such that every naira spent on training and or development of em-
ployees are treated as expenses which affects the profitability of the firm.
Keywords: Investment, Zenith Bank, Asset, Capital, System, Employees, Questionnaire
1 INTRODUCTION
ur main asset is our people” How true is this often re-
peated statement made by management of organiza-
tions? The success or otherwise of an organization de-
pends on how best the scarce physical resources are utilized
by the human resource. What is important here is that the
physical resources are being activated by the human resources
as the physical resources cannot act on their own. In spite of
the important role played by human resources in organiza-
tions, accounting is still based on an industrial paradigm in
which only physical and tangible property is considered asset.
It is in the light of the above that accountants began research
into the area of Human Resource Accounting (HRA). Alt-
hough, it is relatively a new field, its development has already
passed through several discernible stages. The first stage of
development from 1960 to 1966 was marked by interest in
human resource accounting and the derivation of the basic
HRA concepts from related bodies of theory. The initial impe-
tus for the development of HRA came from a variety of
sources including; the economic theory of human capital, or-
ganizational psychologists’ concern for leadership effective-
ness, and a concern for human assets as components of corpo-
rate goodwill. [1], believes that the human resource is the most
vital part of any organization, as it makes sure there exists a
symbiosis between financial and all other physical resources
towards the achievement of organizational objectives and
goals. Conveniently, financial assets are accounted in the
books of accounts as per the general principles of accounting,
but does not account for the human asset. Although many
efforts have been made by many thinkers in this area, prop-
er/appropriate and fully validated model of performance
based on human resource accounting is not yet available.
However, some authors have been able to put writings in the
area. Human Resource Accounting is a process of identifying
and measuring data about human resource and communi-
cating this information to interested parties. Therefore, it is an
attempt to identify and report investment made in resources
of an organization that are not presently accounted for under
conventional accounting practices. Moreover, human resource
accounting helps to measure the value of employees, which
helps the management take vital decisions related to human
resources in order too increase production. It requires the
measurement of the performances of an organization and the
optimum use of the resources under the direct and indirect
control. Hence, the overall valuation is important for decision-
making in order to achieve the organizational objectives and
improve the output. According to [2] HRA aims at depicting
the human resources potential in money terms while casting
the organization’s financial statements.
The traditional accounting procedures which have been prac-
ticed since long have come to stay as acceptable norms. As a
result whenever a new accounting system is developed, it is
pitted against the strength of the traditional system, which is
considered to be comparatively objective and free from any
bias. [3], expressed that human measures is the profit lever of
the knowledge economy. [4], argues that employees interact
together and transform other resources of the organization so
as to add value and that what results from this transformation
is reflected in the profit of the organization. He further posits
that high priority and constant appraisal need to accrue to
human resources as increased moral will result to better trans-
formation and higher reflection of profit. In their contribution,
[5] concluded that human resource accounting can be used as
a political tool to demonstrate mismanagement of human re-
sources, this is a situation which could negatively impact on
O
IJOART
International Journal of Advancements in Research & Technology, Volume 2, Issue 8, August-2013 343
ISSN 2278-7763
Copyright © 2013 SciResPub. IJOART
performance and consequently on profit. Also, they added
that it could be used as a pedagogical instrument for analyz-
ing and structuring and thus better understanding, personal
problem from the applied perspective and thus being better
able to balance applied values against other values.
In spite of these views and findings, human resource of an
organization is yet to be recognized in the balance sheet. Audi-
tors make a true and fair opinion on the financial statements
despite the fact that it does not reflect the values of these ‘soft
asset’ often referred to as our greatest assets. Shouldn’t this
traditional valuation be called into question as human capital
is an increasingly important part of an enterprise’s total value?
This practice seems to have negative effect on the competitive
position of an organization. It could equally hamper the per-
formance of the employee ([4]; [5]). This traditional practice
could again influence the financial position of an organization.
The current accounting system has not been able to provide
the actual value of employees’ capabilities, knowledge and
experiences. This seems to indirectly affect future investments
of a company as each year the cost on human resource devel-
opment and recruitment increases. Haven’t the Accounting
Standard Setters seen the need to legislate HRA or do they see
it as lacking symmetry with traditional resource. All these are
the worries of this present study. It is against this backdrop
that this research work intends to make a formal study on
these issues with a view to proffering solution. Hence, this
study tends to access the effects of human resource accounting
(HRA) in financial statements in order to discover its signifi-
cance on the position of Nigerian Banks using Zenith Bank Plc
Nigeria as a case.
1.1 Managerial Accounting Perspective of HRA
[6], suggested that the value of human capital should be more
fully considered when making decisions about the acquisition
and disposal of people and noted that the accounting practices
currently employed by companies can have an undue influ-
ence in driving the strategic decisions of these companies. He
also noted that there are parallels between the process of ac-
quiring an employee (a human capital asset) and that of ac-
quiring a fixed capital asset. However while most companies
acknowledge the contributions of its employees, they do not
think of the acquisition or disposal of human capital assets in
the same way or with the same thoughtful planning or strate-
gic thinking as they do fixed capital assets. According to [7]
utilized the HRA measure of expected realizable value, and
found that employees’ participation in a management devel-
opment program increased the value of the individuals to the
firm. In addition he noted that the HRA measures provided
upper level management with an alternative accounting sys-
tem to measure the cost and value of people to an organiza-
tion. Thus HRA represented either a paradigm or way of view-
ing human resource decisions, and the set of measures for
quantifying the effects of human resource management strate-
gies upon the cost and value of people as organizational re-
sources. [8], indicated that too many business leaders have no
generally accepted definition or accounting procedure for
tracking training investments, and stated that a lower training
investment is not automatically better for an overall return on
investment. [9], reported that expressing human resource in-
terventions in financial terms and or cost benefit terms is more
effective than using soft accounting information such as data
on job satisfaction. Because the classical function of accounting
is the determination of the value of the economic activity, per-
forming analysis with hard numbers such as cost-benefit anal-
yses helps us determine how resources should be used by
human resources for various interventions. In their view, [2],
opined that, personnel working for a determined enterprise
are actually participating in a value creation process. That is,
any economic activity makes the firm incur cost. One tradi-
tional classification takes into account the cost categories of
raw materials, industrial plants, and personnel. They further
explained that, when adding income flow to an organization’s
market, goods and services, if it is superior to the cost flow, it
becomes value added. This value is a consequence of the inter-
action between materials and human resources in production.
2 MATERIAL AND METHODOLOGY
2.1 Data Collection
The method of data collection used in this study is field survey
method; this involved the use of questionnaire and interview.
The purpose is to give a clear understanding of the concept of
human resource accounting in an organization. The study co-
vers the two branches of Zenith Bank Plc in Awka Town. The
total population of study was 49 staff and a random sample of
43 staff was drawn from the branches of Zenith bank Plc in
Awka. This includes both management and administrative
staff of the bank. The statistical tool used in analysing the data
was the Kruskal Wallis Test with aid of SPSS 17.0 Package.
2.2 Data presentation (see Appendix)
2.3 Research Hypotheses
H01: Accounting for human resources does not improve the
financial position of Zenith Bank Plc.
H11: Accounting for human resources improves the financial
position of Zenith Bank Plc.
H02: Non-application of human resource accounting measures
does not contribute significantly to the future investment of
Zenith Bank Plc
H12: Non-application of human resource accounting measures
contributes significantly to the future investment of Zenith
Bank Plc
H03: Accounting for human resource will not improve employ-
ees’ performance
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ISSN 2278-7763
Copyright © 2013 SciResPub. IJOART
H13: Accounting for human resource will improve employees’
performance
3.0 DATA ANALYSIS AND RESULT
3.1 Kruskal-Wallis Test for testing that accounting for
human resources does not improve the financial posi-
tion of Zenith Bank Plc
Tabl e 4: Ranks
Options N Mean Rank
Response 1 1.00 8 28.44
2.00 8 19.00
3.00 8 6.31
4.00 8 12.25
Total 32
Tabl e 5: Test Statisti cs
a,b
Response 1
Chi-Square 24.999
df 3
Asymp. Sig. .000
a. Kruskal Wallis Test
b. Grouping Variable: Options
3.2 Kruskal-Wallis Test for testing that Non-application
of human resource accounting measures does not con-
tribute significantly to the future investment of Zenith
Bank Plc
Tabl e 6: Ranks
Options N Mean Rank
Response 2 1.00 8 28.50
2.00 8 20.44
3.00 8 8.31
4.00 8 8.75
Total 32
Tabl e 7: Test Statisti cs
a,b
Response 2
Chi-Square 26.354
df 3
Asymp. Sig. .000
a. Kruskal Wallis Test
b. Grouping Variable: Options
3.3 Kruskal-Wallis Test for testing that accounting for
human resource will not improve employees’ perfor-
mance
Tabl e 8: Ranks
Options N Mean Rank
Response 3 1.00 8 27.31
2.00 8 21.06
3.00 8 7.69
4.00 8 9.94
Total 32
Tabl e9: Test Stati sti cs
a,b
Response 3
Chi-Square 23.669
df 3
Asymp. Sig. .000
a. Kruskal Wallis Test
b. Grouping Variable: Options
4 DISSCUSSION
It was observed from Table 5, that accounting for human re-
sources improve the financial position of Zenith Bank Plc,
since a Chi-square of 24.99 was obtained and a corresponding
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ISSN 2278-7763
Copyright © 2013 SciResPub. IJOART
p-value of 0.000 which falls on the rejection region of the hy-
pothesis assuming a 95% confidence interval level (p-value =
0.00 < ?=0.05). Also, Table 4, showed that majority of the re-
spondents Strongly Agreed (1) and Agreed (2) that accounting
for human resources can improve the financial position of
Zenith Bank Plc with a corresponding mean rank of 28.44 and
19.00 respectively. Table 7, showed that non-application of
human resource accounting measures contributes significantly
to the future investment of Zenith Bank Plc, since a Chi-square
measure of 26.35 and a p-value of 0.00 was obtained. Hence,
the null hypothesis was rejected since the Chi-Square measure
of 26.35 is large and the p-value= 0.00 is less than the ?=0.05.
Also, Table 6, showed that majority of the respondents Strong-
ly Agreed (1) and Agreed (2) that non-application of human
resource accounting measures contributes significantly to the
future investment of Zenith Bank Plc with a corresponding
mean rank of 28.50 and 20.44 respectively. In addition, a Chi-
Square measure of 23.66 and a p-value of 0.00 was obtained on
Table 9, this result implies that accounting for human resource
will improve employees’ performance. Since, Chi-Square
measure of 23.35 is large and the p-value= 0.00 is less than the
?=0.05, thus the null hypothesis was rejected. Also, Table 8,
showed that majority of the respondents Strongly Agreed (1)
and Agreed (2) that accounting for human resource will im-
prove employees’ performance with a corresponding mean
rank of 28.50 and 20.44 respectively.
5 CONCLUSIONS
The issue of accounting for human resource accounting has
continued and will continue to fuel discourse in our nation
and globally. Based on the discussions of findings, the study
concludes that accounting for human resources will affect the
organization positively in general and also affect the employ-
ees in particular. The finding implies that accounting system
in Zenith Bank Plc is still based on an industrial paradigm
where only fixed assets such as land, buildings, and motor
vehicles are considered assets, such that every naira spent on
training and or development of employees are treated as ex-
penses which affects the profitability of the firm. Hence, we
recommend the need for banks stop considering every naira
spent on training and development of employees as expenses
to be minimized. Also, by application of human resource ac-
counting measures, we strongly believe that employees will
improve on their performance since they know that their con-
tributions and performance will be assessed and valued at the
end of the accounting period in this vein we suggest that man-
agement should embark on long-term planning exercise which
will help them to identify a potential lay-off decision that
might have long-term effects on the organization.
REFERENCES
[1] Narayan, R. “A New Paradigm in the Era of Globalization”. Asian
Journal of Management Research, 2010, pages 237-244.
[2] Parameswaran, R. and Jothi, K. “ Human Resource Accounting”. The
Chartered Accountant Journal, 2005, 53(7): 867-874.
[3] Gul, A. “An empirical study of the usefulness of human resource turn-
over costs in Australia Accounting firms”. Journal of Accounting, organiza-
tion and Society 1984; 5-11.
[4] Steven, H.A. and Hannie, H. “Accounting for Human Resources”.
Manager Auditing Journal, 1993, 8(2) : 23-27.
[5] Grojer, J. and Johansson, U. “Current Development in Human Re-
source Costing and Accounting”. Accounting, Auditing and Accounta-
bility Journal, 1998,11(4): 495-506.
[6] Moore, R. “Measuring How ‘Human Capital’ Appreciates in Val-
ue over Time”. Plant Engineering, 2007, 61(4): 29-30.
[7] Bullen, M.L. “Human Resource Accounting: A useful Tool for
Measurement and Management in Organizations”. Leadership and
Organizational Management Journal, 2007, 5: 85-103.
[8] Davidove, E. A., and Schroeder, P. A. “Demonstrating ROI of
Training”. Training and Development Journal, 1992, 46(8): 70-71.
[9] Johanson, U. and Mabon, H. “The Personnel Economics Institute
after Ten Years: What has been Achieved and where we are we go-
ing?” Journal of Human Resource Costing and Accounting, 1998, 3(2)
: 65-76.
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ISSN 2278-7763
Copyright © 2013 SciResPub. IJOART
Appendix
Table 1: Distribution of Responses on whether Accounting
for Human Resources improve the financial position of Zen-
ith Bank Plc.
S
/
N
QUESTIONS S
A
(
1
)
A
(
2
)
S
D
(
3
)
D
(
4
)
T
ot
al
1 Expensing values of human
capital development/training
might lead to lower invest-
ment consequently leading
to lower return on invest-
ment.
3
0
6
2
5
4
3
2 When the cost of HR is
capitalized like other physi-
cal assets, the profitability
position will improve which
will in turn enhance the
market value of the firm
2
3
1
0
0 1
0
4
3
3 Inclusion of human resource
in the financial statement
will make the organization to
be valued at its true poten-
tial
2
5
1
2
3
3
4
3
4 The assets of an organiza-
tion as measured within the
conventional accounting is
not a complete reflection of
the organization’s asset
3
5
5
0 3
4
3
5 The true financial position of
the organization can only be
ascertained when the hu-
man resource asset is in-
cluded in the balance sheet
1
5
1
0
8
1
0
4
3
6 Accounting for human re-
source will improve the fi-
nancial position of the firm
3
2
8
0
3
4
3
7 Treating human resource as
expenses to be minimized
distort the financial state-
ment.
2
5
1
0
3
5
4
3
8 Application of HRA
measures would aid man-
agement to acknowledge
the fact that investments in
a company’s human re-
source will result in long-
term profit for the organiza-
tion; thus enhancing the
financial position
2
2
1
5
3
3
4
3
Table 2: Distribution of Responses on the contributionof
Non-Application of Human Resource Accounting on the
future investment of Zenith Bank Plc
S/
N
QUESTIONS S
A
(1
)
A
(2
)
S
D
(
3
)
D
(4
)
To-
tal
1. Treating human resource as expenses
would make management to always
want to minimize investment in this
area.
3
0
8
3
2
43
2. If human resource is treated as asset it
will encourage management to invest
more on it.
2
0
1
4
5
4
43
3. Treating human resources as expenses
will reduce the training and develop-
ment exercise of an organization in
order to reflect higher profit in the Profit
& Loss account
2
6
1
1
3
3
43
4. Expensing HR would eventually reduce
skills and competence in the organiza-
tion
2
2
1
6
3
2
43
5. Non-investment in human capital would
lead to qualified labour force turnover.
2
0
9
8
6
43
6. Career development in an organization
would reduce if human capital is always
expensed.
3
2
9
1
1
43
7. Application of HRA measures would aid
management to make decisions that
treat the company’s employees as
long-term investment of the company.
3
0
9
1
3
43
8. With the use of HRA measures man-
agement is better likely to see the hid-
den cost in a potential lay-off decisions.
3
0
9
1
3
43
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ISSN 2278-7763
Copyright © 2013 SciResPub. IJOART
Table 3: Distribution of Responses on effect of Accounting
for Human Resource on improvement of employees’ per-
formance
S
/
N
QUESTIONS S
A
(
1
)
A
(
2
)
S
D
(
3
)
D
(
4
)
T
ot
al
1
.
Some firms are more productive
than others in almost similar condi-
tions as a result of approach and
competence.
3
0
1
1
0 2
43
2
.
Investment in human resource
capital influences directly or indi-
rectly the human resources and
the productivity of the organization.
2
8
1
0
2
3
43
3
.
Long-term planning of human re-
sources can lead to greater bene-
fits in the long-run.
2
5
1
5
1
2
43
4
.
The success of an organization
wholly depends on the quality of its
human resources.
1
0
1
5
1
1
7
43
5
.
Given the same physical assets
and similar technology, the quality
of human resources is what will
account for difference in perfor-
mance of two different organiza-
tions.
3
1
1
0
0 2
43
6
.
The quality of human resource
capital has direct impact on the
overall productivity of the firm
3
0
1
1
1
1
43
7
.
Human resource accounting is a
panacea for optimum performance
of employees of an organization
1
5
1
8
3
7
43
8
.
Investments in human resources
are considered essential in terms
of quality customer service deliv-
ery.
2
5
1
0
3
5
43
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