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Human Capital Accounting (S16) |
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When financial capital was scarce and labour plentiful in
a predictable world, the focus of attention was on finance. Financial
accounting, planning and control was key to sustained success for mature
organisations. But access to financial capital is no longer an issue in
the global marketplace and human capital is the new critical factor in a
changing environment. Business valuations, company law and corporate
governance are consequently moving away from the conventional
considerations of the last century.
The accounting methods that were developed and became the standard for the old world can no longer place a sensible or fair value on a business nor help its stakeholders to assess its capabilities and future prospects. |
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| We cannot know from financial
statements how much value is lost in wasted human capital during mergers
nor the future cost of developing competencies in the upturn following a
downsizing.
Yet these are the kinds of riches that actually provide the ‘capital’ on which performance is delivered year after year. |
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This
paper deals with five aspects of Human Capital Accounting and the links
with the broader conceptual framework of ‘capital’.
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