Human Capital Accounting As A Means Of Enhancing Information Disclosure In Financial Reports

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This research work is aimed at providing the missing link through human capital accounting as a means of enhancing disclosure in financial reporting with particular reference to Emenite Ltd, while carrying out this research work these are the areas that this research work concentrated. The first chapter is the introductory part of the research work. This chapter also contains the background of the study, statement of problems, research Question etc. Data for the study was sourced from two main sources. Which includes: Primary data: Questionnaires and oral interviews was used to collect information from the respondents. Secondary data : Journals, magazine and other relevant materials relating to the area of my investigation will be review. Extensive literature review was carried out on direct literature and indirect literature on books, journals and past works. The research instrument  used in this study includes oral interview and questionnaire.  The questionnaire is structural as to contain both close and open ended question. Simple tables, pie-charts and percentages were used in treatment of data while chi-square was used in the research work. Based on the findings, conclusions were drawn and recommendations were also in the last chapter of this work which is the fifth chapter.




Title page                                               i

Certification page                                      ii

Approval page                                           iii

Dedication                                              iv

Acknowledgement                                     v

Abstract                                                 vii

Table of contents……                                   viii




1.1  Background of the study…                         1

1.2 Statement of problem                              5

1.3 Objective of the study                              12

1.4 Research question                                  13

1.5 Research hypothesis                              13

1.6Significance of the study …                         14

1.7  Limitation of the study                            15

References                                         18



Literature review

2.1  Accounting for human capital…                   

2.2  Why measure human capital values                     31

2.3  The techniques of measurement                   44

2.4  Human capitals in the knowledge-based economy

2.5  HCA to promote lifelong learning                  45

2.6  HCA to promote return-on-investment …          47

2.7  HCA and the assessment of acquired learning …   49

2.8  HCA and the future of Labour relations …          52

2.9  issues of measurement and validation of learning        56

2.10 Implementation of HCA and the portfolio …       58

2.11 Imperatives of effective management of human capital for

optimum performance                             60

References                                         65



Research design and methodology

3.1  Research design                                   68

3.2  Description of respondents ……                    69

3.3  sources of data                                         70

3.4  Population and Sample Size Determination        71

3.5  Methods of investigation…                         73

References                                         74



Presentation and analysis of data

4.1       Analysis of data  ……                              75

4.2      Test of hypotheses…                              85



Summary of Findings, Conclusion And Recommendations

5.1 Summary of findings                                     90

5.2 Conclusion…                                        91

5.3 Recommendation                                   93

Bibliography                                       95

Appendix I                                         97

Appendix II                                        98




       The implementation of Human Capital Accounting (HCA) is an OECD-recommended means of improving the efficiency of human capital investment and utilization. The concept of HCA has been explored and developed by the OECD as a means to understand and implement the necessary adaptations individuals and nations must make to measure and utilize knowledge assets – knowledge resident in human beings – in relation to economic performance and prosperity. In 1996, the OECD concluded that public policy must focus on the development of better signals for competence validations, valuation, accounting and financial reporting. Firms had begun to think of employees as investments rather than costs, and as the cost-to-investment-based thinking evolved, the transition continued towards full accounting of human capital investments as assets that produce returns over an extended period of time. The OECD publications Measuring What People Know: Human Capital Accounting for the Knowledge Economyand Human Capital Investment: An International Comparisonextend the treatment of physical capital to human capital in a discussion of knowledge production, diffusion and consumption in light of the disciplines of economics, accounting and education.

Human capital is defined as the knowledge that individuals acquire during their life and use to produce goods and services or ideas in market or non-market circumstances.According to the OECD, this definition of human capital is non-committal about the source, nature or validation of embodied competences; and helps to focus on two issues: (1) the productive capacity arising from knowledge; and (2) the utility of improving the methods for assessing the productive capacity of human capital. HCA is a method of systematically identifying, measuring and presenting information about the human resources of an organization. It is related to and sometimes confused with such other concepts as: intellectual capital,intellectual potential,knowledge management, Human Resources Accounting (HRA), Human Capital Management (HCM), intangible investmentsand/or intangible assets – which range from the intellectual property rights of patents, trademarks, copyright and registered design through contracts; through trade secrets and public knowledge such as scientific works; to the people-dependent or subjective resources of know-how, networks, organizational culture, and the reputation of product and company.It has been concluded that the concept of HCA is also directly related to human resources management in the knowledge economy, lifelong learning, PLA/PLAR, electronic LMI management, and the electronic learning record.

The basis for interest in the Portfolio, the assessment and recognition of non-formal and informal learning, and Knowledge Management is expediency. Expediency in the areas of human resources development and management, from the individual to the national level, is needed to address the challenges presented by the emerging Knowledge-based Economy, skills shortages, education/training reform, and structural unemployment. For example, in their analysis of the International Adult Literacy Survey (IALS) results, Human Resources Development Canada (HRDC) and Statistics Canada have concluded “that the ‘new’ economy requires workplace arrangements that empower employees to make workplace decisions and challenge them to use existing skills and develop new ones.”9 The Organization for Economic Co-operation and Development (OECD) has deemed it important that nations concern themselves with how and why they invest in and use human capital because a commitment to improving the skills of citizens is one of the principal means for dealing with economic uncertainty. The OECD has concluded that improvements to the systems of human capital acquisition, measurement, accounting and valuation are key factors in helping a nation’s firms to compete in the globalized economy. “Investment in education and training helps form the human capital – the skills and abilities – that is a vital element in assuring economic growth and individual advancement and reducing inequality. It is an important element in combating unemployment and social exclusion.

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