Human Resource Accounting. A panacea to financial reporting problems

Human Resource Accounting. A panacea to financial reporting problems

Author by Prof. Rufus Ishola Akintoye

Journal/Publisher: Research Journal Of Finance And Accounting

Volume/Edition: 9

Language: English

Pages: 25 - 41

Abstract

Contemporary accounting scandal in the corporate world has cast aspersions on the reliability of financial
reporting calling for urgent solution to restore lost investors’ confidence. This study examined how the inclusion
of human assets in the statement of financial position of companies could serve as a panacea towards answering
the reliability question in financial reporting, since most of the said scandals have been attributed to human
behaviour. Secondary data obtained from four companies, 2 each in Nigeria and Ghana (Cadbury Nigeria Plc;
Dangote Cement Plc; Fan Milk Ghana Limited and PZ Cussons Ghana Ltd) for 2012-2015 were analysed using
descriptive and inferential statistics. The Lev & Schwartz’s Present value of future earnings model was adopted
to recognise the human assets in those reports with the amended financials revealing an improvement in the
value of the companies. The result of the statistical test showed mixed results revealing non-normality of almost
all the financial indices of Return on Asset, Return on Equity, Leverage and Earnings Per Share, thereby
resulting in the rejection of the null hypotheses while the Analysis of Variance favoured the null, as the test
reveals higher f-stat (p-val.) at 5% significant level for all the financial indices. It was concluded that human
resource accounting may resolve some unethical challenges questioning the reliability of financial reporting. It
was therefore recommended that accounting standard setters, IASB, should bring out an exposure draft for an
enduring standard on human resource accounting.


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